FBM KLCI

• The FBM KLCI trended lower last week, closing at 1,618.30 (-27.69 points or -1.68%) on Friday, as cautious trading dominated due to external uncertainties and a lack of local catalysts. Foreign investors turned net sellers last Wednesday after six consecutive days of inflows, adding pressure to the local market. Leading sector declines included Utilities (-4.2%), Property (-2.5%), and Financial Services (-1.1% WoW).
• We expect this holiday-shortened week to be shaped by key external factors, including economic data, US corporate earnings, bond yield trends, and the final stretch leading up to the US presidential election on 5 November. Key events include the Bank of Japan's monetary policy decision on Thursday and US labour market reports-covering nonfarm payrolls, unemployment, and wage growth-which will offer insights into the Fed's next rate move. On the corporate front, over 1,400 US firms will release 3Q earnings, including 161 S&P 500 companies. Notable tech giants reporting this week include Alphabet and AMD on Tuesday, Microsoft and Meta on Wednesday, and Apple, Amazon, and Intel on Thursday, with their results likely to shape global market sentiment, including in Malaysia, amid ongoing economic uncertainties.
• Technically speaking, the weekly FBM KLCI failed to sustain its bullish reversal from the previous week, breaking downward and closing just above its immediate 13-week SMA support at 1,617. Both the weekly RSI and stochastic indicators have retraced to more moderate levels following last week's pullback but show no signs of stabilization or a trend reversal, indicating room for further downside.
• We expect market volatility to increase as investors continue to stay cautious ahead of key events during the shortened trading week. The market is expected to trend downward, with immediate support at 1,617, followed by the psychological 1,600 level. A break below these levels could see the next key support at 1,588, aligning with the 200-day SMA and the lower boundary of the uptrend formed since July 2023. However, sentiment could shift if US bond yields decline or mega-cap tech companies report strong earnings, potentially sparking a rally and challenging the bearish outlook. On the upside, resistance levels are seen at 1,637 (5-week SMA) and 1,642.

Source: Kenanga Research - 28 Oct 2024