Consolidate on Easing Rate Cut Optimism

Stocks gave back earlier gains to end lower on late profit-taking Wednesday, as weak followthrough window-dressing support capped bargain hunting activities. The FBM KLCI eased 1.11 points to close near session lows at 1,464.56, off an intra-day high of 1,470.79, as losers edged gainers 465 to 411 on steady trade totalling 3.84bn shares worth RM2.67bn.

Needs Break Above 1,470 to Aim for 1,490/1,500

In the absence of more significant window-dressing activity, the local market is likely to extend profit-taking consolidation, with buying momentum stalling on dwindling optimism over potential for interest rate cuts next year. The index will need breakout confirmation above 1,470 immediate resistance to fuel further upside towards the 1,490/1,500 next resistance area. Immediate support is at 1,450, with better chart supports at 1,430, and then 1,400/1,390.

Bargain Supermax & Top Glove

Further pullbacks on Supermax should attract buyers again, with key chart supports at 90sen and the 200-day moving average (85sen) cushioning downside, for recovery upside towards resistance from RM1.10 and RM1.20 ahead. Top Glove should also see buyers capping downside closer to support from the 100-day moving average (80sen), with stronger support seen at 70sen, while key upside hurdles will be at RM1.10 and the May 2023 high (RM1.25).

Japan Stocks Extend Rise on Dovish BoJ

Asia markets rose Wednesday, with Japan extending gains after the country’s central bank left its ultra-loose monetary policy unchanged at its final meeting this year. The Bank of Japan kept interest rates at -0.1%, while sticking to its yield curve control policy that keeps the upper limit for 10-year Japanese government bond yield at 1% as a reference. BOJ Governor Kazuo Ueda also struck a dovish tone at a press conference after the policy decision. The People’s Bank of China held its one-year loan prime rate — the peg for most household and corporate loans in the country — at 3.45%. The five-year benchmark loan rate — the peg for most mortgages — was unchanged at 4.2%.

In Australia, the S&P/ASX 200 ended the session 0.65% higher at 7,537.90, hitting a 10-month high. Hong Kong’s Hang Seng index gained 0.66%, while China’s CSI 300 was the only large market in Asia that fell, closing 1.1% lower at 3,297.50. Japan’s Nikkei 225 closed 1.37% higher at 33,675.94, while the broader Topix was 0.67% higher at 2,349.38. South Korea’s Kospi rose 1.78% to end at 2,614.30, gaining the most among Asia-Pacific markets and the small-cap Kosdaq added 0.55% at 862.98.

Wall Street Sharply Lower as Abrupt Sell-Off Snaps Rally

U.S. stocks closed lower overnight after an abrupt mid-afternoon selloff ended Wall Street's impressive rally, which had been driven by falling interest rates and the Federal Reserve's dovish turn. The Dow Jones Industrial Average slid 475.92 points, or 1.27%, to 37,082.00. The Nasdaq Composite was lower by 1.50% to 14,777.94. Both indexes ended a nine-day advance, and they had their worst session since October. The S&P 500 declined 1.47% to 4,698.35, marking its worst day since September. FedEx was the biggest laggard in the S&P 500, losing 12%. The package delivery giant issued a disappointing revenue outlook for the fiscal year, and reported fiscal second-quarter results that fell short of expectations on the top and bottom lines.

Some traders said the selloff could have been aggravated by large purchases of near-term put options on the S&P 500, including put contracts that would guard against a drop below the 4,755 level on the index by the end of the session. Put options convey the right to sell shares at a fixed price in the future and at times options-linked hedging activity can heighten volatility. On the economic front, bigger than expected jump in U.S. consumer confidence and a surprise increase in existing home sales helped turn the major indexes green. The Commerce Department is expected to wrap up the week with its third and final take on third-quarter GDP on Thursday, to be followed on Friday by its wide-ranging Personal Consumption Expenditures (PCE) report, which will cover income growth, consumer spending and, crucially, inflation.

Source: TA Research - 21 Dec 2023