Profit-Taking Pause on Overbought Momentum

Bursa Malaysia shares fell for profit-taking correction on Monday, as traders reduced positions after the recent run-up to a fresh 17-month high and ahead of the extended Chinese New Year holidays. The FBM KLCI slid 5.24 points to close at the day’s low of 1,511.34, off an early high of 1,520.98, as losers beat gainers 605 to 390 on total turnover of 3.22bn shares worth RM2.12bn.

Supports at 1,489/1,478; Resistance at 1,520/1,550

Stocks should pause for profit-taking consolidation given overbought momentum sparked by the recent run-up on the index to a fresh 17-month high. Key index supports cushioning downside will be at 1,489, 1,478 and 1,464, the respective rising 30-day, 50-day and 100-day moving averages, while immediate overhead resistance remains at 1,520, with stronger upside hurdles at 1,550 and 1,580.

Bargain SKP Resources & VSI

SKP Resources need to overcome the upper Bollinger band (80sen) to extend recovery towards the 100-day ma (83sen) and 200-day ma (92sen) ahead, while the lower Bollinger band (65sen) and 123.6%FP (62sen) limits downside risk. The rebound upside for VSI could be checked by overhead resistance from the 50-day ma (82sen) and 200-day ma (86sen), with tougher hurdle at the 61.8%FR (94sen), and downside capped by chart support at 70sen and 66sen.

Most Asian Stocks Lower as China Rebound Off 5-Year Lows

China stocks reversed losses on Monday, rebounding off five-year lows, while most Asian markets started the holiday-shortened week largely lower on fears of higher-for-longer interest rates. The U.S. Federal Reserve Chair Jerome Powell said the central bank would likely move at a considerably slower pace on rate cuts compared with market expectations. Separately, the People’s Bank of China’s decision, announced two weeks ago, to cut the reserve ratio requirements for banks by 50 basis points came into effect on Monday. Hong Kong’s Hang Seng index ended nearly flat, while mainland China’s CSI 300 climbed 0.65% to 3,200.42, reversing losses from earlier in the day. The Caixin survey on services sector activity in China showed a softer expansion for January, compared to December.

South Korea’s Kospi dropped 0.73%, dragged by losses in heavyweight Samsung Electronics and the small-cap Kosdaq fell 0.79%. In Australia, the S&P/ASX 200 fell 0.95% to close at 7,625.9, retreating from its all-time high set on Friday. Markets also awaited an interest rate decision from the Reserve Bank of Australia on Tuesday. In contrast, Japan’s Nikkei 225 climbed 0.54% to end at 36,354.16, while the broader Topix rose 0.67% to close at 2,556.71. China, Taiwan, South Korea, Singapore, and Hong Kong will all see shortened trading weeks as the Lunar New Year approaches.

Wall Street Slips as Rate Worries Persist

Wall Street’s major indexes fell overnight after Federal Reserve Chair Jerome Powell put a chill on prospects for an early interest rate cut, while traders assessed economic data and earnings from corporate America. The Dow Jones Industrial Average fell 0.71% to 38,380.12. The S&P lost 0.32% to 4,942.81, while the Nasdaq Composite fell 0.20% to 15,597.68. Fed Chair Jerome Powell reiterated the central bank is unlikely to cut interest rates next month during an interview with "60 Minutes" on Sunday, while Minneapolis Fed President Neel Kashkari wrote in an essay published on Monday that a resilient economy could defer rate cuts for some time. Stocks fell to their lows of the session after the Institute for Supply Management showed the U.S. services sector's growth picked up in January, with a measure of input prices rising to an 11-month high.

The data added to doubts about when rates would be lowered already kindled by Friday's data signalled the labour market's resilience in the face of tight credit conditions. Lacklustre results from McDonald’s also dampened investor sentiment. McDonald’s fell more than 3% after posting a mixed quarter. Elsewhere, Boeing slumped nearly 2% on more 737 Max woes. Tesla also dragged the broader market, losing more than 3% as worries over rising competition and persistent pricing pressures for the EV giant lingered.

Source: TA Research - 6 Feb 2024