FBM KLCI (Bearish Bias)

• The FBM KLCI declined 0.21% (or 3.10 points) on a week-on-week basis, closing at 1,441.04. The dip was influenced by weak regional markets, driven by factors such as rising yields and ongoing geopolitical tensions, as well as a softer MYR. Investors, in response to increased volatility in U.S. stocks, showed a preference for defensive assets like the U.S. dollar, gold, and short-term debt.

• While the FBM KLCI did not experience as sharp a correction as some other key regional markets, which fell more than 3% last week, its overall outlook for this week leans bearish, given the absence of strong buying catalysts. However, it's worth noting that Johor-themed stocks may gain attention again as we approach the Agong candidacy date on October 27. Overall, the market is likely to see sideways consolidation at best this week, with a bias towards the downside.

• Looking at the technical aspects, the immediate outlook for the FBM KLCI is somewhat uncertain after forming a 'Hanging Man' chart pattern in its weekly chart, indicating a potential loss of control by the bulls. Additionally, the sharp rise in the US CBOE Volatility Index, which measures investor nervousness, reached its highest point in nearly seven months last week. This suggests a cloudy outlook for the regional market, which could impact trading sentiment in the FBM KLCI.

• We anticipate that the FBM KLCI will fluctuate within the range of 1,435 to 1,446. Failure to maintain this level could result in further consolidation down to the 1,429 level. On the other hand, a decisive break above the immediate resistance level at 1,445 could potentially lead the index to retest its recent high of 1,465.

Source: Kenanga Research - 23 Oct 2023