Profit-Taking Pause After Rally to 4-Year High

The local blue-chip benchmark index rallied to a near four-year high on Monday, fuelled by strong gains in key banking stocks which surged 3.7% after the country’s 2Q24 GDP rose to a stronger-than-expected 5.9% growth. The FBM KLCI surged 24.8 points, or 1.53% to close at 1,648.70, off an opening low of 1,624.58 and high of 1,653.35, as gainers led losers 606 to 546 on total turnover of 3.89bn shares worth RM4.30bn.

Resistance at 1,660/1,680; Immediate Supports at 1,620/1,600

Blue chips should pause for profit-taking breather after yesterdays’ strong rally, as investors wait for more economic cues from the region’s upcoming inflation data and central bank decisions. Immediate index resistance levels are revised higher to 1,660, followed by 1,680

and then 1,695, the Dec 2020 high, while immediate supports are at 1,620, then 1,600 and 1,580 as stronger supports.

Bargain Supermax & Top Glove

Supermax will need to overcome immediate resistance from 98sen to enhance upside momentum and aim for RM1.04 and RM1.10 ahead, while the lower Bollinger band (80sen) and recent selloff low of 79sen should act to limit downside risk. Likewise, Top Glove need sustained buying momentum to break above the RM1.10 immediate resistance and target RM1.20 and RM1.31 prior to profit-taking pause, with downside cushioned by the recent selloff low of 85sen.

Asian Markets Mixed Ahead of Central Bank Decisions

Stocks in Asia were mixed on Monday as traders await key central bank decisions in the region this week and the annual meeting at Jackson Hole. In Asia this week, traders will out for central bank releases this week, including the Bank of Korea’s rate decision and minutes of the Reserve Bank of Australia’s August meeting. Inflation data from Japan and Singapore will also be released on Friday, while China will announce its one-year and five-year loan prime rates on Tuesday. Traders also seemed reluctant to make significant moves ahead of the US jobless claims and economic activity data, while Jerome Powell is expected to confirm Federal Reserve interest-rate cuts are on the cards when he speaks in Wyoming.

On economic news, core machinery orders in Japan fell 1.7% year on year in June, surprising economists who had expected a 1.8% rise. Machinery orders are viewed as a proxy for capital expenditure in the country. Japan’s Nikkei 225 was down 1.77%, closing at 37,388.62 while the broad-based Topix fell 1.4% to end at 2,641.14. South Korea’s Kospi slipped 0.85% to close at 2,674.36 and the Australia’s S&P/ASX 200 inched up 0.12%, closing at 7,980.40. The

Shanghai Composite gained 0.49% to 2,893.67, while the Hang Seng added 0.80% to finish at 17,569.57.

Wall Street Extends Winning Streak Ahead Of Jackson Hole Meet

Wall Street's three major stock indexes ended higher overnight as traders await Powell’s Jackson Hole speech later this week. The Dow Jones Industrial Average added 0.58% to finish at 40,896.53. The S&P 500 rose 0.97% to close at 5,608.25, while the Nasdaq Composite jumped 1.39% and ended at 17,876.77. The buying interest came as recent data has eased concerns about the economic outlook while also increasing confidence the Federal Reserve will cut interest rates next month. The Jackson Hole Economic Symposium kicks off on Thursday, and Fed Chair Jerome Powell's remarks on Friday will be parsed for clues regarding the U.S. central bank's path from restrictive to neutral monetary policy.

In U.S. economic news, the Conference Board released a report showing its reading on leading U.S. economic indicators fell by much more than expected in the month of July. Technology and Consumer Discretionary stocks led the gains, as the S&P 500 stretched its daily wins to eight, its longest streak since November of last year, according to Bespoke Investment data. Advanced Micro Devices rose after the chipmaker said it plans to acquire server maker ZT Systems for USD4.9bn to expand its artificial intelligence portfolio to better compete with Nvidia.

Source: TA Research - 20 Aug 2024