RHB Research expects the FBM KLCI to remain in a risk-off consolidation phase ahead of Budget 2027, with persistent foreign outflows, elevated global bond yields and geopolitical risks continuing to weigh on sentiment despite oversold market conditions.
The benchmark index rose as much as 9.5 points to 1,641.2 before paring gains to close at 1,633.4, up 1.6 points.
Market breadth improved to 1.46 from 0.94, snapping a nine-session streak below one, while trading volume increased to 4.17 billion shares worth RM2.95 billion.
Foreign institutions remained net sellers for a 10th consecutive session, although the outflow slowed to RM6 million. Foreign net selling stood at RM341 million for October to date and RM6.49 billion year to date.
Local retailers were also net sellers at RM45 million, while local institutions continued to provide support, recording net purchases of RM51 million for a fifth straight session.
RHB said the KLCI has decisively broken below the 1,655-1,667 support zone and its long-term uptrend line, confirming a Triple Top breakdown and maintaining a bearish technical outlook.
The index remains below all key moving averages, while momentum indicators are still in oversold territory.
Although this could trigger a technical rebound, RHB said there is no clear reversal signal yet.
Immediate resistance is seen at 1,667-1,680, followed by 1,705-1,720. Failure to reclaim the first resistance zone could expose the index to further downside towards 1,624, 1,598 and 1,578.
RHB said elevated oil prices, high Treasury yields and continuing geopolitical tensions could keep investors cautious ahead of Budget 2027 on Oct 9.
The forthcoming expansion of the KLCI from 30 to 50 constituents in two stages — December 2026 and June 2027 — as well as the risk of weaker economic and corporate earnings growth amid higher costs and supply-chain disruptions, could also weigh on sentiment.
Asian markets were generally firmer after another technology-led rally on Wall Street.
The S&P 500 gained 0.58% to a record 7,819, while the Nasdaq rose 0.45% to 27,599 and the Dow Jones Industrial Average added 0.49% to 51,521.
Softer US employment data helped reduce expectations of another Federal Reserve rate increase in October, although Treasury yields remained elevated.
RHB noted that the US 10-year Treasury yield had recently risen to around 5.35%, its highest since 2002, while Brent crude remained near US$101 per barrel, limiting broader risk appetite.
The research house said investors will now focus on upcoming US corporate earnings, Federal Open Market Committee minutes and preliminary October consumer sentiment data for further market direction.
