Sector Rotation to Highlight Trading

The local blue-chip benchmark climbed to a fresh 21-month high on Tuesday, fuelled by strong gains in oil & gas (+5.7%), utility (+0.9%) and plantation (+0.6%) heavyweights, on foreign-led buying after the local currency weakened sharply to approach USD4.80. The FBM KLCI surged 16.98 points, or 1.1%, to end at the day’s high of 1,555.59, off an early low of 1,537.94, as gainers led losers 615 to 425 on improved turnover totalling 3.7bn shares worth RM2.94bn.

Resistance at 1,580/1,600; Supports at 1,530/1,508

Sector rotation should continue to highlight trading near-term, with market volatility seen to increase as the index approach 2-year highs, when it topped out at the 1,600/1,620 levels in early 2022. Immediate resistance is revised higher to 1,580, with stronger upside hurdles coming at 1,600 and 1,620. Key supports cushioning downside on profit-taking pullbacks will be at 1,530, 1,508 and 1,495, the respective rising 10-day, 30-day and 50-day moving averages.

Bargain DNEX & Wasco

DNEX will need to overcome overhead resistance from the 100-day ma (40sen) and 200-day ma (43sen) to extend recovery momentum towards 46sen and 53sen prior to profit-taking pause, while the lower Bollinger band (32sen) limits downside risk. Wasco need to sustain breakout momentum above the 138.2%FP (RM1.30) to target the 150%FP (RM1.36) and 161.8%FP (RM1.43) ahead, while uptrend support from the rising 30-day ma (RM1.12) and 50- day ma (RM1.07) cushion downside.

Asia Mixed as Investors Assess China’s 5-Year Loan Rate Cut

Asian markets closed mixed Tuesday as investors assessed decisions on key lending rates by China’s central bank. China’s state-owned banks stepped in to sell dollars in their bid to stem the slide in yuan following a cut to the country’s key five-year loan prime rate. The country’s state banks were swapping yuan for dollars in the onshore swap market before selling the greenbacks in the spot market to arrest the slide in the yuan. Yuan was trading at 7.198 against the dollar in the spot market.

The CSI 300 closed 0.21% higher at 3,410.85 after the People’s Bank of China cut its five-year loan prime rate by 25 basis points to 3.95% and kept one-year LPR unchanged at 3.45%. Hong Kong’s Hang Seng index was 0.57% higher, Japan’s Nikkei 225 traded 0.28% lower to close at 38,363.61 but was still hovering near record highs, while South Korea’s Kospi shed 0.84% to end at 2,657.79. In Australia, the S&P/ASX 200 closed marginally lower at 7,659, as Star Entertainment fell more than 20% to a record low on report of a possible second inquiry into its Sydney casino.

Tech Stocks Lead Broad Decline on Wall Street

The tech-heavy Nasdaq led losses on Wall Street overnight as chipmaker Nvidia fell sharply ahead of its highly anticipated earnings report, while retail industry bellwether Walmart's upbeat forecast limited losses on the Dow. The Dow Jones Industrial Average fell 0.17% to 38,563.80. The S&P lost 0.60% to 4,975.51, while the Nasdaq Composite dropped 0.92% to 15,630.78. Earnings are front of mind as markets reopen after the Presidents' Day break, with quarterly reports from chip designer Nvidia and leading US retailers on the docket. A scorching rally in Nvidia's shares this year came to a halt as investors worried if the high-flying chip designer's quarterly results would justify its towering valuation. Shares of Nvidia, which is set to report earnings after the bell, tumbled more than 4%.

Meanwhile, shares of Walmart rose more than 3% after the U.S. retail giant forecast fiscal 2025 sales largely above Wall Street expectations and raised its annual dividend by 9%. A weeks-long rally on Wall Street stalled last week, as hotter-than-expected U.S. inflation data pushed back market expectations for the timing of a rate cut from the Federal Reserve. The rate cut is expected in June, according to a slim majority of economists polled by Reuters, who also flagged risk of a further delay in the first cut. Traders are also awaiting the release of minutes from the Fed's latest policy meeting as well as remarks from a slew of central bank officials later this week.

Source: TA Research - 21 Feb 2024