FBM KLCI

• The market experienced a rollercoaster ride last week, with a significant sell-off on Monday triggered by a disappointing US July jobs report, leading to recession fears, concerns over the Fed's interest rate policy, and the unwinding of the Yen carry trade. The FBM KLCI dropped to an intraday low of 1,532.24 (-78.81 points) on Monday but rebounded from Tuesday onwards due to bargain hunting and regional market recovery. By Friday's close, the FBM KLCI eased 15 points (-0.93%) to 1,596.05. Turnover increased to 29.29b units valued at RM23.34b, up from 21.51b units valued at RM16.31b the previous week.

• Moving forward, we believe the market direction this week will still be largely influenced by external factors, including: (i) the potential continuation of the unwinding Yen carry trade, and (ii) upcoming US inflation and job data, which will be closely watched. Domestically, the government is expected to provide updates on its Madani Economic policy progress. Additionally, the Department of Statistics Malaysia is set to report the country’s 2Q GDP on Friday, with earlier estimates suggesting faster-than-expected growth of 5.8%, driven by consumer spending and exports. The recent strengthening of the MYR may also lead investors to be cautious about export-driven stocks.

• Technically, the FBM KLCI weekly chart shows a long-legged 'doji' candlestick pattern, indicating market indecision. The weekly stochastic and RSI remain close to overbought territories, suggesting that a continued retracement may still be possible. However, the daily stochastic and RSI indicators have rebounded from oversold levels, with the index closing slightly above its 5-day SMA on Friday.

• In short, we expect the market to enter a range-bound mode with a downside bias. The trading range is expected to be between 1,580 and 1,608. Key support levels are identified at 1,580 (coinciding with the 13-week SMA), followed by 1,551. On the upside, key resistance levels are at 1,600, followed by 1,608 and 1,615. 

Source: Kenanga Research - 13 Aug 2024