Construction, property and utility stocks continued to firm up Wednesday, as investors remained optimistic the current unity government will be able to rollout key infrastructure projects to boost domestic economic growth. The FBM KLCI added 3.23 points to end at 1,463.51, off an opening low of 1,458.37 and high of 1,464.27, as gainers edged losers 495 to 468 on steady turnover totalling 3.62bn shares worth RM2.21bn.

Break Above 1,464/1,470 to Target 1,490/1,500; Supports at 1,450/1,433

Given the resilient uptrend on the local stock market despite external worries over China’s property and economic growth and threat of further US interest rate hikes, specific stocks in the construction, property, utility and oil & gas sectors should continue to shine and outperform the broader market. As for the FBM KLCI, it will need to sustain strength above the 1,464 immediate resistance and 1,470 to aim for the 1,490/1,500 hurdle next. Immediate support cushioning downside is upgraded to 1,450, with the recent low of 1,433, then 1420/1,400 acting as stronger support platforms.

Bargain DNEX & Hibiscus

DNEX continues base building with downside risk limited to strong chart supports at 41sen and the 30/5/23 low (37sen), pending renewed buying momentum which is crucial to overcome overhead resistance from the 100-day ma (50sen), 200-day ma (55sen) and the 76.4%FR (59sen). Hibiscus will need breakout confirmation above the 200-day ma (99sen) to aim for the 38.2%FR (RM1.03) and 50%FR (RM1.11) ahead, while the 50-day ma (91sen) and lower Bollinger band (90sen) limit downside risk.

Asian Markets Tumble on Fed Rate Concerns, China Woes

Asian markets stumbled on Wednesday as renewed worries about U.S. interest rates and concern over China’s stuttering economy continued to weigh on investor sentiment. The losses in the region follow a drop in US stocks overnight after retail sales beat forecasts, bolstering the case for further Fed tightening. That message was reinforced by Minneapolis Fed President Neel Kashkari, who said that while inflation has been coming down, “it’s still too high.” There are also rising worries after a broad array of Chinese economic data missed expectations and the country's central bank unexpectedly cut two key interest rates for the second time in three months to shore up the struggling economy.

Minutes from the Fed’s July policy meeting are due later Wednesday while investors will also get more clues on the Bank of England’s future monetary policy path when the UK reports inflation. The Euro area is also scheduled to release growth figures. In Japan, the Nikkei 225 fell 1.46% to 31,766.82 and the Topix lost 1.26% to 2,216.52. South Korea’s Kospi fell 1.76% to 2,525.64, while the Kosdaq dropped 2.59% to 878.29. In Australia, the S&P/ASX 200 dropped 1.50% to 7,195.20, on pace for its third day of losses in four days and the Shanghai Composite slipped 0.82% to 3,150.13.

Wall Street Finish Lower as Hawkish Fed Saps Risk Appetite

Wall Street's main indexes finished lower after minutes from the most recent Federal Reserve policy meeting showed central bankers are worried about a possible resurgence in inflation. The Dow Jones Industrial Average dropped 0.52%, to end at 34,765.74. The S&P 500 dipped 0.76% to 4,404.33 and the Nasdaq Composite lost 1.15% to 13,474.63. Stocks accelerated losses after minutes of the Fed's July rate-setting meeting showed most of the central bank officials continued to see significant upside risks to inflation, which could require further tightening of monetary policy. The central bank lifted its benchmark rate to a range of 5.25 to 5.5% last month, the highest level in 22 years.

In addition to the minutes from the Federal Reserve's latest policy meeting, investors also digested the latest batch of economic data. Fresh economic data continued to point to persistent strength in the U.S. economy, with single-family homebuilding jumping in July and industrial output growing more than expected. The benchmark 10-year Treasury yield rose for a fifth straight session to 4.258%, its highest end-of-day level since June 2008. Intel fell more than 3% to lead the Dow lower. Communications services, real estate and consumer discretionary were among the worst-performing S&P 500 sectors, losing more than 1% each.

Source: TA Research - 17 Aug 2023