FBM KLCI (Neutral to Downward Bias)

• After consolidating the previous week, the FBM KLCI resumed its upward trend last week, breaking past the 1,527 resistanceturned-support level to close 1.4% WoW higher at 1,533.55. Factors such as expectations of stronger corporate earnings recovery, attractive valuations, stable domestic politics, and a weaker Ringgit against USD likely fuelled investor interest. Despite the US equity markets' significant drop last Tuesday due to an unexpectedly high CPI report, regional market optimism remained unaffected. The local market’s response, meanwhile, was muted on last Friday after the central bank’s announced that Malaysia’s 2023 GDP growth fell short of targets, reaching 3.7% YoY (vs. targeted 4%-5% growth) due to weak exports.

• This week, the local benchmark index might see increased volatility, especially with US chipmaker, NVIDIA's quarterly earnings report due on Wednesday. The global equity markets, including Malaysia, have been buoyed by the excitement around artificial intelligence, driven in part by companies like NVIDIA. Any negative surprises in earnings or outlook from NVIDIA might lead to profit-taking across the tech and semiconductor sectors, potentially impacting broader markets that have seen significant YTD gains. Moreover, as numerous companies are slated to announce their quarterly earnings before the end of February, sector or stock specific volatility is expected. Nonetheless, the recent increase in trading volume and foreign investment post Lunar New Year suggests that Bursa Malaysia retains a strong near-term outlook.

• Technically, the long-term outlook for the FBM KLCI remains bullish, especially with its standing above the crucial 1,509 level, corresponding to its 200-week SMA. This level is key to sustaining a positive trajectory. Despite anticipating more volatility in the coming week, it's expected that the 1,509 support level is expected towill hold firm, reinforcing the optimistic long-term perspective for the local benchmark index.

• All in, we anticipate continued market optimism in the week's first half, with an expected increase in volatility during the second half. Key resistance levels are set at 1,570 and 1,600, while crucial support is identified at 1,527, with additional support at 1,509, which coincides with its 200-week SMA.

Source: Kenanga Research - 19 Feb 2024