To revisit 1,684-1,700 amid Fed’s pivot, RM strength and China’s sweeping stimulus 

Technical pick: MCE

KLCI: 1673.38 (3)
DOW: 41914.75 (-293.5)
MSCI Asia: 189.62 (0)
FCPO (RM): 4092 (49)
BRENT (USD): 73.46 (-1.71)
USDMYR: 4.1293 (-0.029)
SGDMYR: 3.2136 (-0.013)
EURMYR: 4.6182 (-0.012)
AUDMYR: 2.8391 (-0.007)
GBPMYR: 5.5215 (-0.04)
US: 10-yr yield (%) 3.7849 (0.057)
BNM:10-yr yield (%) 3.742 (-0.003)

Asia/US. Most Asian bourses rose, buoyed by Beijing’s stimulus cheer and upbeat mood from Wall Street after a bumper interest rate cut by the Fed last week, with investors now keenly await more insights from Powell’s speech (Sep 26) coupled with PCE deflator reading (Sep 27). The Dow rose as much as 91 pts in early trades to a new record high at 42,229. However, the index ended -294 pts at 41,914 on heavy profit taking pullback as investors awaited further cues from Powell’s speech and upcoming PCE deflator data (Sep 27). On economic front, Aug new home sales dropped less-than-expected while mortgage applications soared by 11% WoW in line with easing benchmark mortgage rates following Fed’s aggressive rate cut.

Malaysia. Mirroring higher Wall St and regional markets, KLCI rose 3 pts at 1,673.4, led by SDG, PCHEM, MRDIY, TENAGA, PMETAL, SIME and HLBANK. However, market breadth turned negative at 0.50 vs 1.02 previously while daily volume rose 2% to 3.58bn shares valued at RM3.28bn. For a 3rd consecutive day, foreign institutions emerged as major net sellers (-RM165m, Sep: +RM948m, YTD: +RM3.99bn) while local retailers (+RM85m, Sep: -RM198m, YTD: -RM5.00bn) and local institutions (-RM80m, Sep: -RM750m, YTD: +RM1.02bn) were the major net buyers.

Outlook In light of the Fed’s pivot and the narrative of a US soft landing, China’s sweeping stimulus packages, RM appreciation, domestic policy clarity, coupled with improved economic growth and earnings delivery, KLCI is poised to sustain its uptrend towards short-term resistance levels at 1,684 to 1,700 (support: 1,638-1,647-1,663). However, further rally will hinge on insights from the upcoming Budget 2025 (to be tabled on Oct 18), as well as additional details regarding the Johor-Singapore Special Economic Zone (JS-SEZ), expected to be finalized by the end of Nov. 
Technically, MCE’s positive downtrend resistance breakout could spur greater upside towards short term hurdles at RM1.69 (38.2% FR) and RM1.78 (50% FR) levels before hitting stiff barrier at RM1.87 (61.8% FR). On the downside, major supports are situated at RM1.50-RM1.55 range. 

Source: Hong Leong Investment Bank Research - 26 Sept 2024