FBM KLCI

• The FBM KLCI closed the week on a strong note, rising 2.63% (or 43.06 points) to 1,678.80, buoyed by positive performance in regional markets amid expectations that the US Fed might begin cutting interest rates in September. The Financial Services, Utilities, and Telecommunications sectors led the gains with increases of over 2%, partially offset by weaker performance in the Technology, Health Care, and Construction sectors, where sentiment was dampened by the strengthening MYR, disappointments in the latest quarterly corporate earnings reports and a pullback in Data Center-related investment hype.

• Looking ahead, the recent upgrade of bank earnings across the board could potentially raise expectations for FBM KLCI earnings forecasts, serving as a positive catalyst for the market. Bank Negara Malaysia (BNM) is set to release its monetary policy decision on Thursday. Given the lingering inflation risks and a brighter domestic growth outlook, the consensus expectation is for the central bank to keep its policy rate steady at 3%.

• Technically, the FBM KLCI demonstrated strength last week, closing the month with a gain of over 3.2%, the largest monthly increase since January 2024, despite a significant sell-off in early August. This momentum is expected to continue, supported by a strengthening MYR and foreign inflows. However, the weekly stochastic and RSI indicators have entered or are nearing overbought territory, suggesting an unfavorable risk-reward ratio and indicating that an immediate pullback may be on the horizon.

• All in all, we anticipate the market to take a breather following last week’s strong performance and consolidate this week with a downside bias, though the overall upward trend remains intact. Key support levels to watch are 1,652, followed by 1,642. On the upside, key resistance levels are at 1,684, followed by 1,696.

Source: Kenanga Research - 2 Sept 2024