FBM KLCI

• The FBM KLCI edged up 0.45% (7.01 points) to close at 1,573.73 last week, as early-week gains were offset by profit-taking activities and sell-offs in YTL-related stocks due to the announcements of unfavourable corporate exercise. BNM held the OPR steady at 3% on Wednesday thanks to sustained economic growth and manageable inflation which rose 1.7% YoY in December. Sector performance was mixed, with Industrial Products & Services leading gains (+1.2%), while Technology (- 1.1%) saw the largest decline. Globally, the market sentiment was supported by US President Donald Trump's pro-growth initiatives while waiting for further clarity on new tariff policies.
• Looking ahead, the market is likely to consolidate during the shortened trading week with minimal key economic data and closures on Wednesday and Thursday for Lunar New Year. Attention will shift to key global events in the US, including the Fed's interest rate decision (Wednesday) and PCE Price Index (Friday). While the Fed is expected to keep rates unchanged, Fed Chair Powell's comments could still influence markets. Additionally, investors will also focus on U.S. earnings releases from mega-cap tech giants - Microsoft and Meta on Wednesday and Apple on Thursday, where a "sell on the news" reaction is possible following recent rallies. In addition, the 25bps hike in Japan's rate on last Friday could also raise concerns over the potential unwinding of yen carry-trades.
• Technically, the cross below the short-term (5-week) against the medium term (50-day) SMA is suggesting weakening momentum in the near to medium term. The technical outlook appears set for further consolidation, with weekly stochastic and RSI indicators continuing to trend lower, unless Trump's policy announcements deliver a positive surprise for the market.
• In short, we expect the market to trade in a tight range-bound mode with a downward bias amidst lack of growth catalysts during this shortened trading week. Key support levels are at 1,564 (38.2% Fibonacci retracement) and its recent low of 1,545, while resistance levels are at 1,579, followed by 1,592 and 1,597.

Source: Kenanga Research - 27 Jan 2025