Consolidate With Downward Bias

The local market stayed mostly range bound on Wednesday, with rubber glove stocks giving up some of the recent sharp gains fuelled by hopes for strong export demand due to the steep US tariff hikes on China’s products. The FBM KLCI slipped 3.69 points to close at 1,660.59, off an opening high of 1,664.78 and low of 1,654, as losers beat gainers 526 to 442 on reduced turnover totalling 2.29bn shares worth RM2.75bn.

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

The local market should remain in consolidation mode with downside bias given the lack of positive catalyst on the local front, while investors digest the Federal Reserve’s decision to lower interest rates by a half percentage point. Immediate index resistance remains at 1,670, with the recent high of 1,684, then 1,695, the Dec 2020 high, as tougher resistance levels. Immediate support will be at the recent correction low of 1,633, with 1,620 and 1,600 acting as stronger supports.

Bargain MRCB & SunCon

MRCB will need to climb above the 76.4%FR (63sen) to fuel further upside momentum towards 70sen and the 20/5/24 high (74sen), while downside risk should be contained by the lower Bollinger band (50sen) and 38.2%FR (46sen). SunCon need breakout confirmation above the 123.6%FP (RM4.54) to enhance recovery potential towards the 138.2%FP (RM4.87) and 150%FP (RM5.14) going forward, while the 100-day ma (RM3.88) and lower Bollinger band (RM3.73) limit downside risk.

Asian Markets Creep Higher Ahead of Fed Rate Decision

Asian markets crept cautiously higher Wednesday, as traders focused on prospects for the U.S. Federal Reserve’s first cut to interest rates in more than four years. Traders are awaiting key monetary policy decisions this week, with the U.S. Federal Reserve widely expected to cut rates for the first time in four years on late Wednesday. The Fed has been keeping its main interest rate at a two-decade high in hopes of grinding down on the economy enough to stifle high inflation. The Bank of Japan and the Bank of England are also holding monetary policy meetings later this week.

On economic news, Japan’s imports and exports in August rose 2.3% and 5.6%, respectively, from a year ago, according to Japan’s Ministry of Finance, both missing the Reuters poll estimates of 13.4% and 10% growth. Australia’s S&P/ASX 200 closed flat at 8,142.10, after a four-day winning streak that sent the index to a record high on Tuesday. Japan’s Nikkei 225 rose 0.49% to 36,380.17 and the broad-based Topix added 0.38% to 2,565.37. The Shanghai Composite also rose 0.49% to 2,717.28, while South Korea and Hong Kong markets were closed for a holiday.

Wall Street Slips After Fed Slash Interest Rate

Wall Street’s major indexes closed with modest losses overnight, well off their intraday highs, after the Federal Reserve voted to cut interest rates by 50 basis point, opting for a more aggressive reduction than investors had been expecting just a week ago. The Dow Jones Industrial Average slid 0.25% to end the day at 41,503.10. The S&P 500 lost 0.29% and closed at 5,618.26, while the Nasdaq Composite dropped 0.31% to 17,573.30. The late-day volatility on Wall Street came after the U.S. central bank cut the overnight rate by half a percentage point, more than the usual quarter-point adjustment, citing greater confidence that inflation will keep receding to its 2% annual target. Fed policymakers see the central bank's benchmark rate falling by another half of a percentage point by the end of this year, another full percentage point in 2025.

In U.S. economic data released earlier, construction on new homes rose 9.6% in August, the biggest increase in six months, and building permits jumped 4.9% to a 1.48 million rate. Most of the major sectors ended the day showing only modest moves, contributing to the lackluster closure of the broader markets. Semiconductor, software and networking stocks also moved to the downside on the day, contributing to the dip by the tech-heavy Nasdaq.

Source: TA Research - 19 Sept 2024