External Concerns to Check Gains

Bursa Malaysia shares slid lower on cautious trade Tuesday, in line with weaker regional markets as investors focus turns to a slew of Fed speakers for clues on the U.S. rate outlook and how soon an easing cycle could begin. The FBM KLCI fell 5.41 points to close at 1,622.09, off an opening high of 1,628.38 and low of 1,620.80, as losers thrashed gainers 726 to 470 on total turnover of 5.42bn shares worth RM4.22bn.

Resistance at 1,640/1,660; Supports at 1,600/1,583

Lingering concerns over the timing and extent of possible U.S. interest rate cuts this year should keep buyers in check. Immediate index resistance stays at 1,640, with 1,660 and then 1,680 as tougher upside hurdles ahead. Immediate uptrend support remains at 1,600, with 1,583, 1,568 and 1,540, the respective rising 30-day, 50-day and 100-day moving averages, acting as strong supports.

Bargain Maxis & TM

Maxis shares need convincing breakout above the 61.8%FR (RM4.08) to boost upside momentum towards the 76.4%FR (RM4.27) and the peak of 05/05/23 (RM4.59) prior to profittaking pause, while crucial support from the 23.6%FR (RM3.58) limits downside risk. Similarly, TM needs breakout confirmation above the 138.2%FP (RM6.64) to aim for the 150%FP (RM6.81) and 161.8%FP (RM6.98), with key uptrend support from the 76.4%FR (RM5.76) capping downside risk.

Asian Markets Ends Lower Ahead of U.S. Rate Outlook

Asian market traded lower on Wednesday, with anxious traders keeping a wary eye on the outlook for U.S. and U.K. interest rates. Minutes of the U.S. Federal Reserve's last meeting this week should confirm the next move is still likely down, but policy makers first need more confidence that inflation has resumed its downtrend. Fed fund futures imply about a 66% chance of a rate cut by September and have 43 basis points of easing priced in for this year. Figures on UK inflation this week could also decide whether the Bank of England eases as early as June, or waits to August. Forecasts are for core consumer price inflation to slow to 3.6% in April, from 4.2% in March, and anything lower would narrow the odds on a June cut and likely pressure sterling.

On economic news, Japan's exports grew in value terms for the fifth consecutive month in April, official data showed on Wednesday. Meanwhile, the Reserve Bank of New Zealand held official cash rate unchanged at 5.5% for the seventh consecutive time. In Australia, the S&P/ASX 200 inched down by 0.05% to 7,848.10, while South Korea’s benchmark index Kospi closed nearly unchanged at 2,723.88. Japan’s Nikkei 225 fell 0.85% to 38,617.10 and the broad based Topix lost 0.81% to 2,737.36. In mainland, the Shanghai Composite index closed flat at 3,158.54, while Hong Kong’s Hang Seng index fell 0.13% to 19,195.60.

Wall Street Slips on Hawkish Fed Comments

Wall Street’s main indexes tuned lower overnight as traders digested minutes from the Federal Reserve's May meeting that revealed some officials were willing to hike rates if necessary. The Dow Jones Industrial Average fell 0.51% to 39,671.04, The S&P 500 lost 0.27% to end at 5,307.01, and the Nasdaq Composite dropped 0.18% to close at 16,801.54. All three major U.S. stock indexes turned decisively lower in afternoon trading, extending their losses after minutes from the U.S. Federal Reserve showed Fed officials were disappointed in recent inflation readings and acknowledged that "disinflation would likely take longer than previously thought."

Yields for 10-year Treasury notes edged up from session lows after the release of the Fed minutes. On economic front, data showed existing home sales came in below analyst estimates, while hotter-than-expected core inflation data from Britain prompted investors to pull their bets on a Bank of England rate cut next month. After the close, Nvidia reported first quarter earnings that topped Wall Street estimates. The company also announced a ten-forone stock split set to take effect on June 7. It also announced plans to raise its dividend from USD0.04 per share to USD0.10.

Source: TA Research - 23 May 2024