FBM KLCI (Neutral)

• The FBM KLCI wrapped up its third consecutive week of gains, staying above the pivotal 1,600 level and setting a new market cap record of over RM2t. On Friday, the index climbed 0.7% WoW to 1,600.67, buoyed by positive FDI news, including Microsoft's USD2.2b investment in a cloud and AI hub. Leading gains were the utilities, property, and transportation sectors, increasing by 3.9%, 3.8%, and 2.8%, respectively, with CIMB, YTLP, PBBANK, TENAGA, and MAYBANK as top performers. Meanwhile, Bank Negara Malaysia (BNM) held its OPR steady at 3%, aligning with economic forecasts. It expects inflation to stay moderate in 2024, with projected headline and core inflation rates ranging between 2%-3.5% and 2%-3%, respectively, even after considering subsidy rationalisation impacts.

• This week, the direction of local and regional markets is likely to be shaped by the US April Producer Price Index (PPI) and Consumer Price Index (CPI) reports, which will offer insights into the Fed's upcoming monetary policy directions before the FOMC meeting on 12 June. Domestically, BNM is set to release the country's GDP figures for the 1QCY24 on Friday. Earlier, BNM reported an advanced GDP growth estimate of 3.9% YoY for 1QCY24, suggesting an acceleration from 3% YoY growth in 4QCY23.

• Technically, the index has remained firm above the psychological resistance level of 1,600 and all key weekly SMA levels, indicating that its long-term bullish outlook is still intact. In the short term, although some profit-taking might occur following a sharp rally over recent weeks and technical overbought conditions suggested by daily stochastic and RSI indicators, the upward trend will likely continue as long as the index stays above the critical 5-day SMA level (around 1,592).

• In summary, we anticipate the index to resume its upward trend after consolidating near the 5-day SMA level. We expect any near-term pullback to be short-lived. Key support levels are identified at 1,592, followed by 1,573. Conversely, a break above the recent high of 1,610 could propel the index to test its next resistance level at 1,615.

Source: Kenanga Research - 13 May 2024