Buoyant on Data Centre and Infrastructure Plays

Strong buying interest in the construction (+2.7%) and property (+2.1%) sectors on Thursday, fuelled by optimism over data centre and other infrastructure deals, buoyed local market sentiment. The FBM KLCI climbed another 4.74 points to close at 1,623.12, off an early high of 1,628.35 and low of 1,620.02, as gainers led losers 761 to 478 on higher turnover of 5.39bn shares worth RM4.41bn.

Resistance at 1,632/1,640; Supports at 1,604/1,596

The local market undertone should remain buoyant with the construction, property and utility sectors leading gains amid optimism over data centre and infrastructure deals, and increasing hopes for more US interest rate cuts as inflation cools. Immediate index resistance is revised to the May high of 1,632, with 1,640 and 1,660 as tougher upside hurdles, while immediate supports are at 1,604, 1,596 and 1,572, the respective 30-day, 50-day and 100-day moving average levels.

Sell on Rally Gamuda & Sunway Construction

Further rally on Gamuda should stall for profit-taking corrections given the extreme overbought condition, with the rising 30-day ma (RM6.58) and 50-day ma (RM6.17) to provide uptrend supports, while rallies above the 161.8%FP (RM8.19) should meet tougher hurdles at 176.4%FP (RM8.54) and 200%FP (RM9.10). Likewise, rallies on SunCon above the 138.2%FP (RM4.92) should see strong profit-taking resistance near the 150%FP (RM5.19) and 161.8%FP (RM5.46), while profit-taking pullbacks could be cushioned by the rising 30-day ma (RM3.74) and 50-day ma (RM3.48).

Asian Markets Climb on Fed Rate Optimism

Asian markets rose on Thursday as Fed Chair comments reinforced expectations that the Fed could start lowering rates as soon as September. Fed Chair Jerome Powell returned to Capitol Hill to give testimony about interest rates, where he echoed many of his comments from a day before. He said he was “not sending any signals” about when cuts to rates could arrive, but he pointed out the downsides of being too late on them. Traders are expecting the Fed to begin cutting its main interest rate in September, but traders have a long history of being premature in their calls.

Separately in Asia, core machinery orders in Japan unexpectedly fell for a second straight month on a month-on-month basis, slipping 3.2% compared to the 0.8% rise expected by economists polled by Reuters. The Nikkei-225 gained 0.94% to 42,224.02, while the broadbased Topix also added 0.76% to 2,931.24. South Korea’s Kospi also gained 0.81% to 2,891.35 and Australia’s S&P/ASX 200 rose 0.93% to close at 7,889.60. The Shanghai Composite Index rose 1.07% to 2,970.87, while Hong Kong’s Hang Seng index jumped 2.06% to 17,832.33.

Tech Shares Drag S&P 500, Nasdaq Lower

The S&P 500 and Nasdaq ended lower overnight, hit by losses in Nvidia, Apple and Tesla as traders rotated into smaller companies after softer-than-expected inflation data fed bets the Federal Reserve will cut interest rates in September. The S&P 500 fell 0.88% to 5,584.54 and the Nasdaq Composite dropped 1.95% to close at 18,283.41. The Dow Jones Industrial Average rose 0.08% ending at 39,753.75. The sell-off came as traders took the opportunity to cash in on the recent strength in the markets, with some of the biggest tech winners of the year like AI darling Nvidia leading the pullback. Big Tech sold off hard with heavyweights like Nvidia down more than 5%, while the entire "Magnificent 7" group of stocks had its worst day in nearly a year.

Traders flocked to rate sensitive sectors like Real Estate and Utilities following June's cooler than expected inflation print. Labor Department report showed U.S. consumer prices fell unexpectedly in June and the annual increase was the smallest in a year, drawing the Fed closer a September rate cut. Interest rates futures suggest traders see an over 90% chance the Fed will cut rates by its September meeting, up from about 74% on Wednesday, according to CME Group's Fed watch.

Source: TA Research - 12 Jul 2024