Drift Lower on China’s Unimpressive Growth Outlook

Stocks extended falls on Wednesday, dragged by the overnight US correction as investors’ concerns over the global inflation and interest rate outlook dampened market tone. The FBM KLCI lost another 5.47 points to close at 1,531.51, after moving between early low of 1,527.92 and high of 1,535.2, as losers beat gainers 588 to 422 on lower trade totalling 3.65bn shares worth RM2.66bn.

Supports at 1,527/1,512; Resistance at 1,559/1,580

The local market should drift lower due to absence of stimulus details amid China’s disappointing GDP growth target for this year and lacking fresh local leads. Stronger index supports cushioning downside on further profit-taking pullbacks will be at 1,527, 1,512 and 1,489, the respective 30-day, 50-day and 100-day moving averages. Immediate resistance will be from the recent 21-month high of 1,559, followed by 1,580, with stronger upside hurdle seen at the 1,600 level.

Bargain Hartalega & Kossan

Further weakness on Hartalega should attract bargain hunters looking for rebound upside towards the 76.4%FR (RM2.66), with tougher hurdle from the 8/1/24 peak (RM3.05), while downside is cushioned by the 50%FR (RM2.22) and 38.2%FR (RM2.03). Kossan should also attract buyers on dips, with upside capped by the 76.4%FR (RM1.93) and 29/1/24 high (RM2.17), and key chart supports from the 100-day ma (RM1.75) and 200-day ma (RM1.56) cushioning downside.

Asian Markets Mixed Ahead of China Congress Remarks

Stocks in Asia were mixed on Wednesday, as trader’s awaited policy cues from Beijing and congressional testimony from Federal Reserve Chair Jerome Powell. Sentiment towards China remained weak after Beijing presented a largely underwhelming, 5% gross domestic product target for 2024, the same as the prior year. The 2024 National People’s Congress also failed to provide any clear cues on how Beijing planned to roll out more support for the Chinese economy, which is struggling with a post-COVID economic recovery. Traders are also hesitant to place major bets ahead of congressional testimony from Federal Reserve Chair Jerome Powell that will be parsed to gauge if the U.S. central bank is ready to start cutting rates.

The Fed chief is likely to reiterate recent comments stressing the central bank needs greater confidence inflation is slowing before cutting interest rates. The next monetary policy meeting is scheduled for March 19-20, with the Fed widely expected to leave interest rates unchanged. Japan’s Nikkei 225 closes nearly unchanged at 40,090.78, while the broad-based Topix edged 0.39% higher to 2,730.67. In Australia, the S&P/ASX 200 added 0.12% to 7,733.50, and the Shanghai composite fell 0.26% to 3,039.93. South Korea’s Kospi slid 0.30% to end at 2,641.49, while the small-cap Kosdaq gained 0.50% to 870.67.

Wall Street Rebound as Traders Digest Powell Comments

Wall Street's three main indexes rebounded overnight as traders digested Federal Reserve Chair Jerome Powell's stance that interest rate cuts are still likely this year. The Dow Jones Industrial Average rose 0.20% to 38,661.05. The S&P added 0.51% to 5,104.76, while the Nasdaq Composite gained 0.58% to 16,031.54. The rebound on Wall Street partly reflects a positive reaction to congressional testimony by Federal Reserve Chair Jerome Powell. Powell told the House of Representatives Financial Services Committee that "if the economy evolves broadly as expected," the central bank can be expected to cut its policy rate this year. He also said the Fed was on a "good path" toward achieving a soft landing by bringing inflation under control while avoiding economic contraction.

Powell’s remarks left intact expectations that the Fed will deliver three quarter-point rate cuts this year. While traders still see policy easing as early as June, their forecast is more aligned with the Fed’s than it was at the start of the year. On economic news, labour market data released ahead of Friday's February employment report showed job openings dipped in the first weeks of 2024 and private employers added fewer workers than expected to their payrolls in February. Apple fell for its sixth straight trading day, capping gains even as Nvidia climbed more than 3%. Alphabet and Tesla also both traded lower in the session.

Source: TA Research - 7 Mar 2024