Profit-Taking and Overbought Momentum to Cap Upside

The local blue-chip benchmark extended gains to a near two-year high on Wednesday, lifted by strength in healthcare, property, technology and telco heavyweights as regional markets climbed on strong US corporate earnings and economic data. The FBM KLCI rose 9.84 points to close at 1,571.48, off an early low of 1,564.89 and high of 1,572.48, as gainers swarmed losers 777 to 327 on robust trade of 4.25bn shares worth RM3.03bn.

Resistance at 1,580/1,600; Supports at 1,546/1,538

While stocks should extend gains given the upbeat external sentiment, supported by strong US corporate profits and economic data, profit-taking and overbought momentum is likely to cap upside potential. Immediate resistance for the index remains at 1,580, with stronger upside hurdles seen at 1,600 and then 1,620. Key supports will be at 1,546, 1,538 and 1,516, the respective rising 30-day, 50-day and 100-day moving averages.

Bargain Hartalega & Kossan

Hartalega will need sustained strength above the upper Bolinger band (RM2.83) to enable challenge of the 8/1/24 high (RM3.05), with a confirmed breakout to aim for RM3.20 and the 123.6%FP (RM3.44) ahead, while downside risk is capped by the 61.8%FR (RM2.42) and 200- day ma (RM2.38). Kossan need convincing breakout above the 8/4/24 high (RM2.20) to fuel

upside momentum towards the 123.6%FP (RM2.44) and 138.2%FP (RM2.59) going forward, with the 76.4%FR (RM1.95) and 61.8%FR (RM1.80) to cushion downside.

Asian Markets Track US Tech Rally

Stocks in Asia advanced on Wednesday, as traders parsed the latest financial releases from corporate America and economic data from the region. In stateside, Tesla climbed more than 10% in extended trading after the company announced a renewed push into “more affordable” electric vehicle models. Visa and Texas Instruments jumped more than 2% and 6%, respectively, on the back of stronger-than-expected reports. On economic data from the region, first-quarter inflation figures from Australia showed the consumer price index rose 3.6% year-over-year, slightly above a Reuter’s poll expectation of a 3.5% rise. Still, that marked its fifth straight quarter of slowing inflation. Separately, producer prices in Japan’s service sector climbed 2.3% year on year in March, accelerating from the revised 2.2% gain recorded in February.

Traders also await more economic data this week, including the release of first-quarter U.S. GDP data as well as the core personal-consumption expenditures (PCE) price index, which is the Fed's preferred measure of inflation. The Japanese benchmark jumped 2.42% to 38,460.08, while the broad based Topix added 1.67% to 2,710.73. South Korea’s Kospi climbed 2.01% to 2,675.75, powered by a 4% gain in heavyweight Samsung Electronics, while the small cap Kosdaq gained 1.99% to 862.25. The Shanghai composite index also rose 0.76% to 3,044.82, while the Australia’s S&P/ASX 200 ended nearly unchanged at 7,683.00.

Wall Street Subdued as Bond Yields Rise

Wall Street’s main indexes were subdued overnight as traders weighed an uptick in Treasury yields amid positive corporate results particularly from technology giants. The Dow Jones Industrial Average fell 0.11% to close at 38,460.92. The S&P ended nearly unchanged at 5,071.63, while the Nasdaq Composite edged higher by 0.10% to 15,712.75. A positive reaction to the latest corporate earnings news initially contributed to an extended rebound on Wall Street following the considerable weakness seen last week. Tesla jumped nearly 12% after the electric vehicle maker's plans to boost production and roll out more affordable models overshadowed its weak quarterly results. Texas Instruments also climbed after the chipmaker forecast second-quarter revenue above analysts' estimates. Buying interest waned shortly after the start of trading, however, with an auction of a record USD70 billion worth of five-year U.S. Treasury notes helped to push bond yields higher and weighed on equities.

IBM Corp. and Facebook parent Meta Platforms are among the companies due to report their quarterly results after the close of today's trading. On the U.S. economic front, the Commerce Department released a report showing new orders for U.S. manufactured durable goods surged by more than expected in the month of March. Markets are also eyeing first quarter gross domestic product data on late Thursday and personal consumption expenditures for March on Friday. Hotter-than-expected consumer price inflation report for March had pushed back expectations of when the Fed will begin cutting interest rates.

Source: TA Research - 25 Apr 2024