TA Sector Research

Daily Brief - 16 May 2024

Publish date: Thu, 16 May 2024, 11:05 AM

Rubber Glove Stocks Seen Choppy After Recent Rally

While blue chips extended sideways trade on Wednesday, the healthcare sector surged 9.6% led by rubber glove stocks on demand optimism after the US hiked tariffs on China’s healthcare and glove products to 25%. The FBM KLCI dipped 2.65 points to end at the day’s low of 1,603.23, off an early high of 1,607.64, as losers edged gainers 579 to 574 on very robust trade totalling 6.2bn shares worth RM4.67bn.

Resistance at 1,620/1,640; Supports at 1,576/1,562

The broader market should stay range bound as investors assess key US consumer inflation data for the likely interest rate trend, while trading momentum focus on rubber glove and healthcare related stocks, which should be choppy after recent sharp gains. Immediate resistance for the index stays at 1,620, with stronger upside hurdles seen at 1,640 and then 1,660. Immediate uptrend supports will be at 1,576, 1,562 and 1,535, which are the respective rising 30-day, 50-day and 100-day moving averages.

Bargain Bumi Armada & Hibiscus

Bumi Armada need to overcome the upper Bollinger band (60sen) to boost upside momentum towards the 76.4%FR (63sen), with next key hurdle from the 7/3/23 peak (73sen), while the 200-day ma (54sen) and 50%FR (52sen) cushion downside. Likewise, Hibiscus will need breakout above the upper Bollinger band (RM2.80) to extend recovery towards the 20/10/23 peak (RM2.98), with tougher hurdles from RM3.20 and the 123.6%FP (RM3.44), while downside is seen capped by the 76.4%FR (RM2.51) and 61.8%FR (RM2.23).

Asian Markets Mixed Ahead of Key US Inflation Data

Asian markets were mixed Wednesday, matching Wall Street overnight that saw the Nasdaq Composite index hit a fresh record closing high despite strong inflation data. The producer price index reading for April came in at 0.5%, above the 0.3% that economists polled by Dow Jones had expected. The initial market reaction was negative but stocks subsequently rose as March wholesale prices were revised down to show a 0.1% decline. Markets in South Korea and Hong Kong were shut on Wednesday for a public holiday.

Investors also assessed Australia’s annual budget released late on Tuesday. The People’s Bank of China kept its one-year medium term lending facility rate unchanged at 2.5%. Mainland China’s CSI 300 index fell 0.85% to close at 3,626.06. In Australia, the S&P/ASX 200 index closed 0.35% higher at 7,753.70. Japan’s Nikkei 225 gained 0.08% to end at 38,385.73, while the broader Topix ended flat at 2,730.88.

Wall Street Extend Gain as Inflation Cools

Major U.S. stock indexes finished higher overnight after an inflation slowdown reinforced bets the Federal Reserve will cut interest rates sooner than expected. The Dow Jones Industrial Average rose 0.88% to close at 39,908.00. The S&P added 1.17% to 5,308.15, while the Nasdaq Composite jumped 1.40% to 16,742.39. The rally on Wall Street comes following the release of a highly anticipated Labour Department report showing consumer prices in the U.S. rose by slightly less than expected in the month of April. The consumer price index rose 0.3% for the month of April, less than the Dow Jones estimate for a 0.4% monthly increase. Separately, retail sales rose 3.04% year on year in April, versus March's 4.02% increase, and were flat on a monthly basis.

Both reports should allow officials at the Fed to breathe more easily because they suggest prices and economic activity aren’t reaccelerating. Yields on the benchmark U.S. 10-year Treasury and 2-year Treasury dipped following the morning’s reports. The yield on the 10- year Treasury fell nearly 9 basis points to 4.348%. Market leaders such as Nvidia popped upon the inflation reading, with shares of the GPU manufacturer rising nearly 4%. Tech titans Apple and Microsoft both added more than 1%. In earnings, Walmart was expected to provide more colour on consumer spending when it reports results on late Thursday. The retail giant's shares underperformed.

Source: TA Research - 16 May 2024

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