Sideways as US Rate Optimism Cushion China Growth Worries

The local market slipped into profit-taking consolidation on Thursday after recent strong gains, with concerns over China’s growth momentum due to the weak property sector dampening sentiment. The FBM KLCI dipped 2.16 points to close at 1,464.68, off an early high of 1,465.16 and low of 1,460.46, as losers beat gainers 487 to 419 on lower turnover of 3.48bn shares worth RM2.07bn.

Resistance at 1,465/1,470; Support at 1,450/1,430

Stocks should trade sideways ahead of the weekend, with worries over economic growth momentum in China cushioned by optimism the US Federal Reserve may be ending its interest rate hike and lean towards cutting rates next year. Immediate index resistance remains at 1,465/1,470, with the 1,490/1,500 area acting as tougher upside hurdle. Immediate support is raised to 1,450, with stronger supports at 1,430, then 1,400/1,390, and the end June low of 1,370 as crucial support.

Bargain Gamuda & Sunway Construction

Gamuda will need breakout confirmation above the 13/10/23 high (RM4.72) to extend uptrend and target the 138.2%FP (RM5.00), 150%FP (RM5.23) and 161.8%FP (RM5.46) going forward, while the 100-day ma (RM4.45) and 200-day ma (RM4.25) provide uptrend supports. Sunway Construction need convincing breakout above the 12/10/23 high (RM1.99) to fuel further gains towards the 123.6%FP (RM2.13) and 138.2%FP (RM2.23) ahead, with support from the 100- day ma (RM1.80) to cushion downside.

Asian Stocks Fall on Weak China Property Sector

Asian stocks fell on Thursday, pausing the strong gains made this week, as fresh Chinese data showed prolonged weakness in the property sector and dented recent optimism about a recovery in the world's second-largest economy. While data released this week showed China's industrial and retail sectors making a comeback, a sharp drop in property investment and weak home prices suggest persistent problems in the sector that could drag on the country's overall recovery. Meanwhile, Japanese exports grew for a second straight month in October but at a sharply slower pace due to slumping China-bound shipments of chips and steel.

In China, stocks fell partially because investors were disappointed by a top level Sino-U.S. meeting, with Shanghai's blue-chip CSI300 index down 0.7% and Hong Kong's Hang Seng index falling 1.3%. South Korea’s Kospi was flat, while Japan’s Nikkei 225 dipped 0.2% and Australia’s S&P/ASX 200 fell 0.67%. While U.S. President Joe Biden and Chinese leader Xi Jinping had agreed to resume military-to-military communications and cooperate on anti-drug policies, a sign ties were improving, some investors were disappointed at the lack of any major breakthroughs in the talks.

Wall Street Mixed as Traders Digest Earnings

Wall Street’s main indexes ended mixed overnight after disappointing earnings reports from Walmart and Cisco put a damper on equities' November rally. The Dow Jones Industrial Average fell 0.13% to 34,945.47. The S&P 500 ticked higher by 0.12% and ended the session at 4,508.24, while the Nasdaq Composite ended the day almost unchanged at 14,113.67. Walmart dropped 8.09% after the retail giant said U.S. consumers were spending cautiously because of inflation, even as it raised its annual forecast for sales and profit. Cisco's shares also dropped more than 9% after the network-equipment giant slashed revenue forecasts, wiping away more than USD20 billion of the Dow component's market value.

Keeping declines in check however, U.S. Treasury yields moved lower after a Labor Department's report showed weekly jobless claims had risen more than expected, cementing bets that the Fed will not need to raise rates further. While money markets have fully priced in a probability that the Fed will hold rates steady in December, they see about a 62% chance of a rate cut in May of at least 25 basis points, according to CME Group's Fed-Watch tool. Meanwhile, the S&P 500 energy sector fell nearly 3%, for its worst day in more than a month after West Texas Intermediate December contract tumbled more than 5%.

Source: TA Research - 17 Nov 2023