Range Bound Pending US Rate Cut Next Week

Blue chips extended consolidation on Thursday as rebound on technology and construction stocks were offset by profit-taking in banking and telco heavyweights. The FBM KLCI dipped 1.49 points to end at 1,638.31, off an early high of 1,649.87 and low of 1,637.91, but gainers led losers 669 to 353 on reduced turnover of 2.61bn shares worth RM2.94bn.

Supports at 1,633/1,620; Key Resistance at 1,670/1,684

Stocks should extend range bound trade ahead of the weekend, with cautious market undertone persisting ahead of next week’s highly anticipated US interest rate cut. Immediate index support remains at the recent correction low of 1,633, with 1,620 and 1,600 acting as stronger supports. Immediate resistance is revised lower to 1,670, with the recent high of 1,684, then 1,695, the Dec 2020 high, as tougher resistance levels.

Bargain Tenaga & TM

Tenaga needs to renew breakout momentum above the upper Bollinger band (RM15.15) to enhance upside potential towards the 123.6%FP (RM16.03) and 138.2%FP (RM16.91) ahead, while the 100-day ma (RM13.62) provides good uptrend support. TM will need convincing breakout above the 16/7/24 high (RM7.05) to enable uptrend extension towards the 123.6%FP (RM7.66) and 138.2%FP (RM8.04) going forward, with the 100-day ma (RM6.51) and 200-day ma (RM6.03) cushioning downside risk.

Tech Rally Lift Asian Markets

Asian markets rose Thursday for the first time this week, as a tech-fueled rally on Wall Street spread across the region. Asian chipmaking heavyweights rallied after Nvidia CEO Jensen Huang made a compelling case for the future demand for AI chips. Meanwhile, traders also reacted to a key US inflation report that showed a bigger than expected increase in core inflation, raising expectations for a quarter-point rate cut at the US Fed's monetary policy meeting next week. The data seemingly reduced the chances of the Fed cutting interest rates by 50 basis points but is still expected to continue lowering rates in the coming months. Traders are now awaiting a policy decision from the European Central Bank later in the day.

On the economic front, Japan’s producer price index rose 2.5% year-on-year in August, less than the expected 2.8% and the 3% reported in the previous month. The data is among the key indicators closely watched by the Bank of Japan. Japan’s Nikkei 225 jumped 3.41% to close at 36,833.27, while the broad-based Topix added 2.44% to 2,592.50. South Korea’s Kospi gained 2.34% to 2,572.09 and Australia’s S&P/ASX 200 rose 1.10% to 8,075.70. Hong Kong’s Hang Seng index was up 0.77% to 17,240.39, but the Shanghai Composite index fell 0.17% to 2,717.12.

Wall Street Ends Higher on Rate-Cut Optimism

Wall Street’s major indexes ended higher overnight, as latest inflation data helped cement expectations for the Federal Reserve to take a modest approach next week with its first interest-rate cut in four years. The Dow Jones Industrial Average rose 0.58% to end at 41,096.77. The S&P 500 gained 0.75% to close at 5,595.76, while the Nasdaq Composite added 1%, closing at 17,569.68. The strength that emerged on Wall Street came as traders remain optimistic about the outlook for interest rates following this week's inflation data. Before the start of trading, the August Producer Price Index provided another indication that inflation pressures are cooling.

Separately, initial claims for state unemployment benefits stood at 230,000 for the week ended Sept. 7, in line with estimates. Shares of mega-cap tech and semiconductor names continued to rally, boosting the market during afternoon trading. Artificial intelligence powerhouse Nvidia jumped 1.9%, while Alphabet and Facebook parent Meta Platforms each gained more than 2%. Moderna shares plummeted nearly 16% after the drug-maker said it will cut USD1.1 billion in expenses by 2027.

Source: TA Research - 13 Sept 2024