FBM KLCI

• The FBM KLCI continued its retracement last week but saw a small rebound on Friday, ending with a slight loss of 0.02% WoW or 0.28 points to close at 1,590.09. The weak performance was primarily due to ongoing profit-taking in key sectors such as property (-2.4%), technology (-1.7%), and utilities (-1.4%). Market turnover increased to 23.5b units valued at RM16.9b, compared to 22.37b units valued at RM17.7b the previous week.

• Moving forward, last Friday’s cooling US inflation data is expected to support short-term market optimism, with traders still betting on two rate cuts despite Fed projections of just one this year. Market focus is likely to shift to the Sungai Bakap state by-election on July 6, where the rising cost of living will be a key theme, reflecting current sentiments on subsidy rationalization plans. Additionally, general election outcomes from France and the UK, Europe's two largest economies, are expected to impact global financial market direction.

• Technically, the weekly chart of the index has formed a 'doji' candlestick pattern, indicating market indecision. The weekly stochastic and RSI indicators have fallen below their overbought territory following the recent retracement. However, on the daily chart, the stochastic indicator has entered oversold territory and is forming a base, trading within a tight range of 1,582 to 1,594 over the past five days. A breakout or breakdown from this range will signal a new market direction.

• In short, we expect the market to have an upward bias this week after recent profit-taking. Key resistance levels are at 1,595 and the psychological 1,600. Key support levels are identified at 1,582 and 1,570.

Source: Kenanga Research - 1 Jul 2024