Focus on Oil and Gas Stocks as Blue Chips Congest

Stocks stayed soft as profit-taking interest persisted Tuesday, as investors traded cautiously ahead of the start of the U.S. Federal Reserve’s two-day monetary policy meeting, which will ultimately decide the interest rate direction. The KLCI ended flat at 1,457.66 after ranging between high of 1,459.00 and low of 1,454.61, as gainers beat losers 519 to 406 on steady turnover of 3.94bn shares worth RM2.13bn.

Resistance at 1,465/1,470; Supports at 1,440/1,433

Blue chips should extend range bound trade on caution over external uncertainties, while the oil and gas related stocks continue to attract bargain hunters amid stronger Brent oil prices. Immediate overhead resistance for the index remains at 1,465, then 1,470, with the 1,490/1,500 area as next resistance, while immediate support cushioning downside stays at 1,440, followed by 1,433, with subsequently 1420/1,400 acting as stronger supports.

Bargain Genting Berhad & GENM

Genting Berhad shares should attract buyers looking for rebound upside from current oversold levels, with a confirmed breakout above the 200-day ma (RM4.39) to aim for the 76.4%FR (RM4.55) and RM4.70 ahead, while the 50%FR (RM3.91) strongly cushions downside. Genting Malaysia is in base building mode, pending decisive breakout above the 61.8%FR (RM2.60) to target the 76.4%FR (RM2.74) and RM2.90 going forward, with the 38.2%FR (RM2.38) cushioning downside.

Rate Worries Weigh on Asia

Asian markets were mostly lower in cautious trading Tuesday ahead of the Federal Reserve’s upcoming decision on interest rates. Starting with the Federal Reserve on Wednesday and ending with the Bank of Japan two days later, monetary policy will be determined at key meetings across half of the Group of 20. Advanced-economy central banks may draw particular focus as global policymakers adapt to the theme US officials set out at Jackson Hole in August. The Fed is widely expected to leave interest rates unchanged, but traders will pay close attention to the accompanying statement and the central bank's projections for clues about the outlook for rates. While CME Group's Fed-Watch Tool is currently indicating a 99% chance the Fed will leave rates unchanged this week, the outlook for the November meeting is somewhat more mixed.

In economic news, Australia’s central bank is still of the position that inflation in the country is “too high,” but opted to hold its benchmark policy rate at 4.1% in its last meeting. Minutes from the Reserve Bank of Australia revealed that the board debated between raising rates by 25 basis points, or leaving it unchanged. In Australia, the S&P/ASX 200 fell 0.47% to 7,196.60, while the Japan’s Nikkei 225 lost 0.87% to 33,242.59. South Korea’s Kospi fell 0.60% to 2,559.21, and the Kosdaq dropped 0.83% to 883.89. In mainland, the Shanghai composite lost 0.03% to 3,124.96, but Hong Kong’s Hang Seng index bucked the wider sell-off and rose 0.37% to 17,997.17.

Wall Street Slips Ahead of Fed Decision on Rates

Wall Street's main indexes fell in choppy trading as market participants wait for the Federal Reserve’s latest decision on interest rates. The Dow Jones Industrial Average lost 0.31% to end at 34,517.73. The S&P 500 slid 0.22% to 4,443.95, while the Nasdaq Composite fell 0.23% 13,678.19. The weakness on Wall Street comes as traders remain on edge ahead of the Federal Reserve's monetary policy announcement on Wednesday. With investor bets now pricing in a 99% chance the Fed will hold rates steady, according to the CME Fed Watch Tool, much of the trader’s focus is on what Fed Chair Jerome Powell says about the November meeting and any new indication on future moves from the updated Summary of Economic Projections, or the so-called "dot plot."

Negative sentiment may also have been generated in reaction to a Commerce Department report showing a sharp pullback in U.S. housing starts in the month of August. The impact of rising interest rates crimped demand in U.S. housing as a resurgence in mortgage rates led homebuilding last month to plunge to more than a three year-low. Disney slid more than 3% after announcing plans to nearly double its investment in its cruise and parks business. Among the 11 major sectors of the S&P 500, consumer discretionary and technology suffered the largest percentage declines.

Source: TA Research - 20 Sept 2023