The FBM KLCI is expected to remain in a risk-off consolidation phase in the near term as persistent foreign selling, elevated global bond yields and hawkish US Federal Reserve expectations continue to weigh on market sentiment, according to Hong Leong Investment Bank (HLIB) Research.
In its latest market outlook, HLIB said the benchmark index slipped 0.7 point to 1,671.6 on Sept 25 after recovering from an intraday decline of 5.3 points.
Trading volume rose to 4.08 billion shares from a five-day average of 3.52 billion, while turnover stood at RM2.69 billion.
Foreign institutions remained net sellers for a fourth consecutive session, recording RM132 million in outflows. This brought five-day net selling to RM473 million, month-to-date outflows to RM1.15 billion and year-to-date outflows to RM5.60 billion.
Local institutions provided support with RM164 million in net purchases, lifting their five-day inflows to RM384 million.
HLIB said the KLCI’s technical outlook remains cautious after the index retreated from 1,753 points on Aug 26 to 1,661.9 on Sept 21 before moving sideways.
The research house said a triple-top formation and the index’s failure to reclaim its long-term ascending trendline kept the near-term bias negative.
Immediate support is seen at 1,655 points, followed by 1,639. On the upside, the index would need to recover above 1,685 and the 200-day moving average at 1,704 to signal improving stability.
A sustained recovery could then target 1,715 and 1,731, while a decisive breakout above 1,731 would shift attention back towards 1,753 and the year-to-date high of 1,771.
HLIB said sentiment could remain restrained by elevated oil prices, high global bond yields and expectations of further US monetary tightening.
The US 10-year Treasury yield recently climbed above 5.2%, while markets raised expectations of a 25-basis-point Fed rate hike in October to 64%, according to the report.
Domestically, HLIB said continued foreign fund outflows, potential second-half earnings disappointments and household affordability pressures could also limit near-term upside for Malaysian equities.
