Further Consolidation as High US Rates Persist

Blue chips extended sideways trade on Wednesday with most investors cautious over potential for the US interest rates to remain high due to the strong US economy and elevated inflation. The FBM KLCI ended flat at 1,513.11 (+0.13) after oscillating between high of 1,514.05 and low of 1,510.2, as losers edged gainers 552 to 385 on muted trade totalling 3.04bn shares worth RM2.08bn.

Supports at 1,492/1,481; Resistance at 1,520/1,550

The local market should extend profit-taking consolidation amid lacking domestic leads and as market players wind down ahead of the extended Chinese New Year holiday break. Key index supports cushioning downside will be at 1,492, 1,481 and 1,466, 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 Dialog & Hibiscus

Further weakness on Dialog shares would be attractive to bargain for oversold rebound towards the 76.4%FR (RM1.90), with next hurdles seen at the 61.8%FR (RM2.05) and 200-day ma (RM2.10), while crucial support will be at the 17/10/22 low (RM1.66). Hibiscus looks attractive to bargain at current levels for rebound upside to the 50%FR (RM2.73), while a confirmed breakout should aim for the 61.8%FR (RM2.93) and 76.4%FR (RM3.18) ahead, and the 200-day ma (RM2.45) provides strong downside cushion.

Asian Markets Firmer on China Support Hopes

Most Asian markets ended firmer on Wednesday as traders weighed the impact of China’s efforts to prop up the market and a slew of cautious remarks from Federal Reserve officials. China's regulators have announced further curbs on short selling and state investors said they were expanding their stock buying plans. Bloomberg News also reported President Xi Jinping would discuss the stock market with financial regulators, though there was no confirmation this had happened or what was discussed. Meanwhile, the timing of U.S. rate cuts was no clearer after Federal Reserve Presidents Loretta Mester and Neel Kashkari welcomed the progress on inflation but signaled there was more work to do before policy could be eased.

Further guidance will come later Wednesday from Fed speakers which include Governors Adriana Kugler and Michelle Bowman, along with Presidents Thomas Barkin and Susan Collins. South Korea’s Kospi jumped 1.30% to 2,609.58, leading gains in Asia, while the Kosdaq gained 0.61% to 811.92. In Australia, the S&P/ASX 200 rose 0.45% and closed at 7,615.80, and the Shanghai composite index rose 1.44% to 2,829.70. In Japan, the Nikkei 225 fell 0.11% to 36,119.92, while the broader Topix gained 0.42% to 2,549.95.

Wall Street Post Gains as Traders Digest Earnings

Wall Street’s major indexes finished higher overnight as traders parsed through another slate of quarterly earnings, with the debate over timing of interest rate cuts still rumbling in the background. The Dow Jones Industrial Average rose 0.40% to 38,677.36. The S&P gained 0.82% to 4,995.06, while the Nasdaq Composite added 0.95% to 15,756.64. A better-thanexpected earnings season, coupled with upbeat guidance, has been a source of strength for the market in recent weeks, illustrating that consumer spending is healthy and that the economy remains resilient in the face of high interest rates. Meanwhile on Wednesday, Fed officials continued to tout that interest rates are not likely to come down in March. Boston Fed President Susan Collins said that rate cuts could come "later this year," but first the central bank needs to see more evidence of inflation cooling.

Enphase Energy popped 17% after the solar company said its inventory glut may be nearing a bottom, boosting other solar stocks in sympathy. Ford gained 6% after beating Wall Street’s fourth-quarter estimates and issuing higher-than-expected guidance, while Chipotle Mexican Grill climbed 9% on strong earnings and traffic. Nvidia and Microsoft climbed about 2% to trade near fresh highs, while Meta Platforms surged 3.3%. Alphabet and Amazon rose 0.9% each.

Source: TA Research - 8 Feb 2024