FBM KLCI

• As expected, the local market faced a challenging shortened trading week, with heightened caution pushing the FBM KLCI briefly below the 1,600 psychological level on Friday before a partial recovery. The index closed down 14.32 points (-0.88%) at 1,603.98, impacted by declines in Construction (-1.8%), Property (-1.6%), and Technology (-1.4%), though partially offset by gains in Plantation (+2.1%) and Transportation (+0.2%). Notably, crude palm oil (CPO) futures surged to a 2-year high last Friday, gaining 7.3% WoW to reach RM4,868 per tonne. The increase is attributed to stronger demand and supply constraints due to aging trees and support for biodiesel.
• Looking ahead, investors are gearing up for a busy week with key economic data releases, the 3Q 2024 earnings season, and two major events: the U.S. presidential election results on Tuesday and the Fed's policy outlook on Thursday following its two-day meeting. Markets will be closely watching the Fed's tone for hints on future rate direction, especially given recent economic strength. Locally, BNM will announce its latest monetary policy decision on Wednesday, with expectations that the central bank will keep the OPR steady at 3%.
• The FBM KLCI failed to hold above its critical 13-week SMA (at 1,616) last week, with no signs of stabilization or reversal in the weekly RSI and stochastic indicators, suggesting potential for further downside. We believe the index may re-test its key support at 1,591 this week, which aligns with the 200-day SMA and an upward trend line from July 2023, amid anticipated heightened volatility. A decisive break below this line could indicate a new downward trend.
• All in, we expect rising volatility and a downward trend as investors remain cautious ahead of key events this week. Key support levels are at the psychological 1,600, followed by 1,591 and 1,571 (50-week SMA). On the upside, resistance is expected at 1,616 (13-week SMA) and 1,630.

Source: Kenanga Research - 4 Nov 2024