FBM KLCI (Downside Bias)

• The FBM KLCI was mostly lower last week due to profit-taking following recent gains and was also in line with the downbeat performance in the regional markets. It closed -0.72% WoW (or 11.09 points) to 1,538.02 on last Friday. Weekly volume jumped to 22.5b shares worth RM19.6b vs 11.8b shares worth RM12.2b a week ago.

• This week, with limited significant US corporate and economic data, the local market is poised for a continued pullback after recent strong gains. The lackluster 4QCY23 corporate earnings reporting season contributed to this outlook. Additionally, Bank Negara Malaysia is expected to release its monetary policy statement and overnight policy rate (OPR) decision on Thursday, with widespread anticipation for the OPR to remain at 3%.

• Technically, the FBM KLCI's bullish outlook remains strong, highlighted by its position above the critical 1,510 level, coinciding with its 200-week SMA—a key factor for its positive trend. However, a short-term pullback to the 1,527 level is expected before the index resumes its upward movement. This view is supported by the reversal signals from the oversold stochastic and Smart MCDX indicators, indicating a near-term correction.

• All in, we anticipate the short-term pullback to extend into this week, with immediate support at the 1,527 level, indicative of the previous upward trend's peak, and subsequent support at 1,510. On the flip side, the key resistance levels are set at 1,544 and 1,559.

Source: Kenanga Research - 4 Mar 2024