FBM KLCI

• As expected, the FBM KLCI continued its downward trend, aligning with weak regional performance due to poor US economic data and growth concerns. Despite the Ringgit rallying to a 14-month high at RM4.495 against the US dollar in anticipation of a US rate cut, the strong currency did not prevent broad-based selling in the local equity market. On Friday, the benchmark index dropped 0.11% to 1,611.05, with nearly all subsectors except financial services (up 1.4% WoW) recording losses of 1% to 7% WoW. Weekly turnover decreased to 21.5b units valued at RM16.3b, compared to 23.2b units valued at RM15.6b the previous week.

• Moving forward, the market direction will likely be influenced by external factors, such as renewed US recession concerns due to weak economic data and escalating geopolitical tensions in the Middle East. Additionally, the delay of Nvidia's upcoming AI chips due to design flaws could dampen global AI enthusiasm and affect local data center-related investments. On the corporate front, the initial batch of tech sector earnings has been disappointing. Upcoming earnings from tech companies like Genetech, Globetronics, and MI Technovation could provide further insights into sector developments.

• Technically speaking, an inverted hammer candlestick pattern has appeared on the weekly chart, indicating a potential downtrend reversal. The index broke its 5-week SMA during the week but closed slightly above the support line at 1,611, coinciding with its 50-day SMA. The continued overbought condition of the weekly stochastic oscillator, along with a high RSI indicator, suggests room for further consolidation.

• In short, we expect heightened market volatility to persist with a downside bias this week. The market may have a higher chance of breaching the psychological support at 1,600. Key support levels are identified at 1,609, followed by 1,600 and then 1,581. On the flipside, key resistance levels are at 1,615 and 1,632. 

Source: Kenanga Research - 5 Aug 2024