Key Blue Chips Resume Uptrend on Interest Rate Optimism

The local blue-chip benchmark rallied to end at a fresh nine-month high on Monday, fuelled by regional strength on optimism global interest rates have peaked and rate cuts may follow next year. The FBM KLCI surged 14.74 points to close at the day’s high of 1,464.67, off an opening low of 1,452.29, as gainers beat losers 665 to 284 on robust trade totalling 3.76bn shares worth RM2.34bn.

Resistance Revised Up to 1,490/1,500; Support at 1,450/1,430

Renewed buying interest in key blue-chip telcos, banking and utility heavyweights should see them resuming uptrends on hopes the rising global interest rates trend is ending and should give way to rate cuts next year. On the index, resistance is revised higher to the 1,490/1,500

area, followed by 1,520 as next upside hurdle. Immediate support is also adjusted upwards to 1,450, with 1,430, and then 1,400/1,390 as stronger support platform.

Bargain Axiata & CelcomDigi

Axiata need convincing breakout above the 100-day ma (RM2.48) to enhance upside potential towards the 200-day ma (RM2.70), with tougher hurdles from the 38.2%FR (RM2.82) and 50%FR (RM3.01), and downside cushioned by the lower Bollinger band (RM2.20). CelcomDigi will need breakout confirmation above the 138.2%FP (RM4.55) to aim for the 150%FP (RM4.68), 161.8%FP (RM4.82) and 176.4%FP (RM4.98) ahead, while the lower Bollinger band (RM4.14) limits downside risk.

South Korea’s Kospi Lead Asian Markets Higher

Equities in South Korea led gains in Asia on Monday, after markets moved to price in earlier rate cuts in the United States and Europe and assessed the latest batch of economic data from the region. Investors brought forward their forecasts for Federal Reserve rate reductions next year, according to swaps pricing, and have now fully priced in a cut by June. Battered bond markets also enjoyed a welcome recovery as a benign U.S. payrolls report and upbeat productivity numbers suggested the labour market was cooling enough to obviate the need for further rate hikes from the Federal Reserve. Markets also imply around an 80% probability the European Central Bank will be cutting rates by April, while the Bank of England is seen easing in August.

An odd man out is Australia's central bank, which is considered likely to resume hiking rates at a policy meeting on Tuesday as inflation stays stubbornly high. On economic news, Japan’s business activity expanded in October but at its softest pace this year, according to a private survey. South Korea’s Kospi jumped 5.66% to close at 2,502.37 after financial authorities in South Korea said short-selling will be banned until the end of June 2024. Japan’s Nikkei 225 also gained 2.37% to 32,708.48, while the Topix added 1.64% to 2,360.46. In Australia, the ASX 200 closed 0.28% higher at 6,997.40, and the Shanghai composite index rose 0.91% to 3,058.41.

Wall Street Drifts Higher Ahead of Fed Cues

Wall Street’s main indexes eked out narrow gains overnight as market participants awaited guidance from a host of Federal Reserve policymakers later in the week on the central bank's policy path. The Dow Jones Industrial Average inched up 0.10%, to settle at 34,095.86. The S&P 500 edged up 0.18 % to end at 4,365.98, while the Nasdaq Composite rose 0.30 % to finish at 13,518.78. The Federal Reserve's monetary policy announcement last Wednesday combined with softer than expected jobs data last Friday has led to optimism that the central bank is done raising interest rates. Trading activity remains somewhat subdued, however, with a lack of major U.S. economic data keeping some traders on the sidelines. Traders will be listening out for confirmation when several Fed officials step up to speak this week, including two appearances by Chair Jerome Powell. Regional Fed Presidents John Williams and Raphael Bostic are among those on the docket.

Meanwhile, the market still has a stream of quarterly earnings ahead, while the calendar is quiet on the economic front. A total of 403 companies in the S&P 500 have reported profits through Friday on the third quarter, with 81.6% surpassing analyst estimates, per LSEG data. Dish Network saw its worst decline in 23 years as shares dropped more than 30% on disappointing earnings. Bumble fell 4.9% as the dating app operator said founder Whitney Wolfe Herd will step down as chief executive. Traders this week await updates from Walt Disney, Wynn and MGM Resorts and Occidental Petroleum.

Source: TA Research - 7 Nov 2023