FBM KLCI (NEUTRAL)

• The FBM KLCI wrapped up the week with a slight decline, retreating by 0.99% WoW to settle at 1,441.97, coinciding with its crucial 13-week Simple Moving Average (SMA). This decline was in line with the performance of key regional markets, partly attributed to ongoing foreign outflows since 4 December.

• Looking ahead, we believe the local market will continue its sideway consolidation mode ahead of the US final Fed’s meeting on 14 December. Market expectations suggest that the Fed will adopt a cautious approach toward future rate hikes, considering economic deceleration. While there's speculation about a potential rate cut by March, Fed Chair Jerome Powell is expected to temper such expectations, emphasizing that any rate hikes will be contingent on preventing a resurgence of inflation. While the upward trends in US markets remain intact for now, it's worth nothing that this external bullish momentum could be disrupted by factors such as significant shifts in economic data, or changes in expectations regarding interest rate cuts.

• From a technical perspective, the index retraced to its crucial 13-week SMA level last Friday, which was just 3 points away from its pivotal 50-week SMA at 1,438.76. The weekly Stochastic Oscillator remained in overbought territory and showed early signs of trending lower, indicating potential challenges ahead. Nonetheless, historical patterns suggest that window dressing activities may occur leading up to the Christmas week, which could impact market dynamics.

• Our expectation is that the index will hover at around 1,435-1,445 range this week. A strong and sustained break above its previous week high of 1,457 could pave the way to the recent high of 1,465. Conversely, a decisive break below the key support level of 1,438 could lead to a decline towards 1,430, coinciding with its 200-day SMA level.

Source: Kenanga Research - 11 Dec 2023