FBM KLCI (NEUTRAL)

• The FBM KLCI opened the year on a soft note but soon saw an uptick in buying, especially after a few selling sessions. The surge was notably fuelled by heavy purchases of YTL Corp and YTL Power shares, driven by strong earnings from their Singapore power business and positive expectations in the data centre sector. Interest in blue chips and Johor-themed investments also spiked, with daily market volume exceeding six billion for two consecutive days last week. The index closed the week 32.95 points higher (2.3%), reaching an 11-month high at 1,487. Despite substantial foreign investment, the MYR/USD weakened to RM4.6455 from RM4.5848 the previous week.

• The coming week is expected to maintain this optimism, supported by continued foreign interest and the Sultan of Johor's endorsement of the unity government, which is favourable for political stability.

• Technically, the FBM KLCI broke past key resistances at 1,465 and 1,470, with a rising stochastic indicator and strong MCDX banker chip, hinting at a continued rise. However, the index might face a substantial challenge near the 1,500 level, close to its 200-week SMA at 1,504. A pullback is likely before it potentially resumes its upward trajectory. A firm break above the 200- week SMA could signal a new uptrend.

• This week, the index is expected to oscillate between 1,470 and 1,500. Key resistance lies at 1,500 and then 1,504. On the downside, falling below the crucial 1,470 support could lead to a decline towards 1,459, in line with its 5-week SMA.

Source: Kenanga Research - 8 Jan 2024