FBM KLCI

• The FBM KLCI struggled to sustain its upward momentum last week, closing 0.28% lower (-4.5 points) at 1,608.75, despite positive regional markets' performance. Persistent foreign outflows weighed heavily on the index, with foreign investors turning net sellers since 20 November. Over the past 17 trading days, a record RM4.03b has been withdrawn-the highest in three years-including RM2.2b sold over five consecutive days. Key factors driving this outflow include geopolitical tensions, rising US bond yields, and concerns over Trump's tariff threats and protectionist policies, prompting foreign investors to reassess their regional portfolios.
• Looking ahead, markets widely expect the US Federal Reserve to implement a 25bps rate cut on Wednesday, with attention focused on its forward guidance, as rate cut expectations for 2025 have moderated under the new administration. Additionally, sentiment could be pressured by reports of potential US sanctions on Chinese banks and Russia's "dark fleet" oil tankers-vessels allegedly transporting Russian oil above the USD60/barrel price cap.
• Technically, although the FBM KLCI struggled to maintain its upward momentum last week, it remained above its immediate 50-week SMA (1,589) and hovered around the 200-day SMA (approximately 1,605). The weekly stochastic and RSI indicators, positioned near the 50-level, suggest potential for recovery.
• In summary, we expect bargain hunting to persist this week, accompanied by higher volatility and an upward bias, though gains are likely to remain capped. Key support levels are at 1,605 (200-day SMA) and the psychological 1,600, while resistance levels are set at 1,611 (13-week SMA) and 1,616.

Source: Kenanga Research - 16 Dec 2024