FBM KLCI

• The FBM KLCI posted a weekly gain of 0.7% (or 11.84 points) to close at 1,635.74 last Friday, buoyed by increased foreign participation, particularly in local financial services stocks, amid a stronger MYR against the USD (RM4.372 vs. RM4.428 a week ago). The index kicked off the week with a robust 1.5% gain on Monday, though this was partially offset by profit-taking activities throughout the week. Notably, all sub-sector indices saw weekly declines except for the financial services sector, which advanced by 3.3%. Overall market turnover rose to 18.6b units valued at RM17.6b, up from 17.8b units valued at RM13.6b the previous week.

• Looking ahead, while the market may see a brief positive reaction to Friday’s Wall Street gains, further selling could follow as much of this optimism has already been priced in. Investors will shift their focus to corporate earnings, both local and U.S., as we enter the final week of the earnings reporting season for the quarter ended June 2024. The local top-three banks by assets—Maybank, Public Bank, and CIMB—are set to release their earnings starting August 28, with expectations of decent growth, supported by a strong 2Q GDP of 5.9%. Additionally, all eyes will be on Wednesday's earnings report from NVIDIA, a major player in the AI sector, which is expected to deliver its fifth consecutive quarter of triple-digit gains in both sales and net profit. This report is anticipated to play a significant role in shaping global market direction in the near term.

• Technically, the FBM KLCI weekly chart has formed a ‘shooting star’ candlestick pattern, signalling a potential trend reversal. The weekly stochastic and RSI indicators are also showing divergence, reinforcing the likelihood of a near-term pullback.

• In short, we expect continued profit-taking activities early in the week, with the highly anticipated NVIDIA earnings report likely to influence global market direction from Wednesday onwards. Key support levels to watch are 1,615, which aligns with the 5- week SMA, followed by the psychological level of 1,600. On the upside, key resistance levels are at 1,642, followed by the recent intra-day high of 1,660.

Source: Kenanga Research - 26 Aug 2024