Profit taking may cap gains near 1,590-1,600 levels, ahead of central bank meetings and CNY holidays next week 

Technical Pick-SENFONG

KLCI: 1577.2 (-10.6)
DOW: 44565.07 (408.3)
MSCI Asia: 181.68 (0.2)
FCPO (RM): 4216 (26)
BRENT (USD): 78.29 (-0.71)
USDMYR: 4.4443 (0.007)
SGDMYR: 3.2756 (-0.004)
EURMYR: 4.6272 (-0.008)
AUDMYR: 2.7836 (-0.004)
GBPMYR: 5.4735 (-0.011)
US: 10-yr yield (%) 4.6436 (0.033)
BNM:10-yr yield (%) 3.783 (0)

Asia/US. Asian markets fluctuated ahead of the looming 10% tariff on Chinese imports effective Feb 1, as well as the BOJ's policy decision today, following recent hawkish comments from BOJ officials. Meanwhile, the SHCOMP gained 0.5% on news that Beijing plans to direct major state insurers and commercial insurance funds to boost investments in domestic stocks. Dow surged 409 pts to 44,565 while the S&P 500 jumped 32 pts to a fresh record high at 6118. The rally was fuelled by strong earnings from GE and UNP, along with Trump's call for immediate interest rate cuts and urged Saudi Arabia to lower oil prices, and reiterated his commitment to offering low taxes for companies manufacturing in the US while imposing tariffs on those producing abroad.

Tracking a rally in Wall St, Asian markets ended higher with tech shares leading the gains after Trump announced a JV dubbed “Stargate”, with OpenAI, ORCL and Softbank to invest USD500bn to build critical AI infrastructure in the US. However, sentiment remained cautious in anticipation of a potential rate hike at the BOJ meeting on Jan 24, and Trump’s threat to impose a 10% tariff on Chinese imports as soon as Feb 1. 

Malaysia. After soaring 32.2 pts in four consecutive days and persistent foreign net outflows, KLCI fell 10.6 pts to 1,577.2. Profit taking led to a further decline in market breadth to 0.42 from 1.01 previously, while daily volume rose 9% to 3.24bn shares valued at RM2.75bn. Foreign net selling continued for the 16th day in Jan (-RM169m, Jan: -RM2.33bn, 2024: -RM4.2bn) alongside local retailers (-RM10m, Jan: +RM678m, 2024: -RM5.74bn) while local institutions (+RM179m, Jan: +RM1.65bn, 2024: +RM9.95bn) were major net buyers.

Technical view After rebounding from a low at 1,545.7 (Jan 17) to 1,590.8 (Jan 22), KLCI lost 10.6 pts on profit taking to end at 1,577.2, slipping back below the downtrend channel. For further upside, the benchmark must break above the upper trendline near 1,590 to advance toward 1,600, 1,613 (200D MA) and 1,625 (38.2% FR) levels. Failure to do so could trigger more downside near 1,566 (76.4% FR), 1,545 and 1,529 (Aug 5 low) levels. 

Outlook Mirroring overnight rally from Wall St, KLCI may attempt to revisit key resistance at 1,590-1,600 (support: 1,545-1,566) levels. Nevertheless, gains could be capped ahead of the CNY holidays next week as investors will continue to assess: (i) Trump 2.0 policies; (ii) China’s economic challenges; (iii) continued foreign outflows, and (iv) upcoming major central bank decisions, notably from BOJ (Jan 24), ECB and FOMC (Jan 30). 

Technically, SENFONG (CP: RM0.90, non-rated TP: RM1.51) looks like an attractive bargain, with recovery upside towards the RM0.95 (23.6% FR), RM1.03 (38.2% FR) and RM1.09 (50% FR) zones, following the Hammer pattern on Jan 22. Key retracement support levels are pegged at RM0.85 (Jan 22 low) and RM0.825 (70W MA).  

Source: Hong Leong Investment Bank Research - 24 Jan 2025