Drift-Down to Prevail on Weak Economic Cues

The local market extended falls on Thursday, again led by technology, utility and oil & gas stocks, with fresh worries over US economic growth and weak oil prices dampening investor sentiment. The FBM KLCI fell another 5.42 points to close at 1,664.82, off an early high of 1,677.46 and low of 1,663.18, as losers beat gainers 796 to 323 on higher turnover of 3.3bn shares worth RM3.43bn.

Supports at 1,633/1,620; Key Resistance at 1,684/1,695

The current market drift-down should prevail as investors remain defensive given the weak economic cues from China and the US, and as the market await the upcoming US jobless claims and unemployment data for further leads. Immediate index support remains at the recent correction low of 1,633, with 1,620 and 1,600 acting as stronger supports. Key resistance will be the recent high of 1,684, then 1,695, the Dec 2020 high, followed by the 123.6%FP (1,702) and 138.2%FP (1,741) of the 1,369 low to the 1,638 high.

Bargain DNEX & Velesto

Further selloff on DNEX would aggravate oversold momentum and spark technical rebound ahead, with the 18/1/24 pivot low (31.5sen) and 30sen cushioning downside, and overhead resistance seen at 38sen, the 200-day ma (40sen) and 100-day ma (42sen) capping upside. Likewise, further dip on Velesto should increase potential for oversold rebound going forward, with the 5/8/24 low (18sen) and 38.2%FR (16sen) as stronger supports, and resistance from the 61.8%FR (22sen) and 200-day ma (25sen) seen to stall upside.

Japan Led Fall as Other Asian Markets Mixed

Asian markets closed mixed on Thursday after a sell-off in the previous session, with Japan’s Nikkei leading losses in the region. The Nikkei 225 fell 1.05% to close at 36,657.09, while the broad-based Topix fell 0.48% to end at 2,620.76, after the release of Japan’s July wage data. Real wages climbed 0.4% year on year, rising for a second straight month after a 1.1% rise in June. The strong pay report offers the Bank of Japan more room for a rate hike, which could put pressure on equities. Other economic data coming from the region include retail sales numbers from Singapore.

The Hang Seng index ended largely flat, while mainland China’s CSI 300 rose 0.17% higher to close at 3,257.76. Shares of some Chinese developers inched higher on optimism that the country was reportedly considering a two-phase reduction in interest rates to shore up its embattled property sector. On Wednesday, China’s financial regulators proposed a reduction in interest rates of up to USD5.3 trillion worth on outstanding mortgages to decrease borrowing costs for millions, while easing pressure on its banking sector. South Korea’s Kospi fell 0.21% to close at 2,575.5, while Australia’s S&P/ASX 200 rose 0.4% to close at 7,982.4.

Wall Street Wobbles Ahead of Crucial Job Data

Wall Street’s major indexes struggled to find traction overnight, as traders digested mixed economic data while they waited for crucial US jobs data that will be key in determining the size of a Federal Reserve rate cut in September. The Dow Jones Industrial Average lost 0.54% to settle at 40,755.75. The S&P 500 slipped 0.30% to end at 5,503.41, while the Nasdaq Composite gained 0.25% to finish at 17,127.66. Before the start of trading, payroll processor ADP released a report showing private sector employment in the U.S. increased by much less than expected in the month of August. Meanwhile, the Labor Department released a separate report showing a modest decrease by first-time claims for U.S. unemployment benefits in the week ended August 31st.

The weak data did little to calm trader jitters as they waited for U.S. non-farm payroll report for August, which is expected to clarify how fast the U.S. Federal Reserve will cut interest rates at its September meeting. Traders see an almost 50-50 chance the Federal Reserve will lower rates by 0.5% at its September meeting. On the oil front, the Organization of the Petroleum Exporting Countries and its allies decided to postpone an increase in crude-oil production that had been planned for the fourth quarter.

Source: TA Research - 6 Sept 2024