FBM KLC

• The FBM KLCI ended on a strong note last week, gaining 1.7% WoW (or 27.85 points) to close at 1,623.90. The rally was fuelled by hopes for a "soft landing" in the US economy after encouraging economic data eased recession fears. Additionally, Malaysia's stronger-than-expected 2Q GDP growth of 5.9%, driven by robust private consumption and favorable labor market conditions, further boosted sentiment, with the index rising nearly 0.7% on Friday. The Energy, Utilities, and Financial Services sectors led the gains, climbing over 2% WoW.

• Looking ahead, the local market's direction will likely depend on corporate earnings early in the week, as we enter the final two weeks of the reporting season. Notable companies reporting this week include PETGAS, MAXIS, YTLPOWR, KLK, and GTRONIC. Later in the week, attention will shift to the Jackson Hole Symposium starting Thursday, where investors will look for signals on major Fed policy changes. Fed Chair Jerome Powell is expected to discuss the economic outlook and provide guidance on U.S. interest rates during his speech on Friday.

• Technically, the FBM KLCI's weekly chart shows a morning star candlestick pattern, indicating a potential bullish market ahead. The weekly stochastic and RSI indicators are trending upwards, though they are approaching overbought territory, suggesting there is still room for bullish momentum to build. However, the daily chart reveals a 3-point gap between 1,614 and 1,617, indicating a higher likelihood of this gap closing if consolidation occurs this week.

• In summary, we expect the market to record a mild weekly gain this week, with the potential to close the mentioned gap due to profit-taking. Key immediate resistance levels are identified at the recent high of 1,638, followed by 1,642. On the downside, key support levels are located at 1,615, followed by 1,610, which coincides with the 5-week SMA.

Source: Kenanga Research - 19 Aug 2024