Getting Oversold, Eyeing Near Term Support Levels at 1,535-1,545

Technical Pick: SUNWAY 

KLCI: 1552.7 (-)
DOW: 44881 (168)
FCPO (RM): 4282 (-)
BRENT (USD): 76.9 (+0.3)
USDMYR: 4.3938 (-)
SGDMYR: 3.2549 (-)
EURMYR: 4.5781 (-)
GBPMYR: 5.4683 (-)
US: 10-yr yield (%) 4.52 (-0.01)
BNM:10-yr yield (%) 3.80 (-)

Asia/US. Asian markets closed mixed in muted trades as markets in China, Hong Kong, Taiwan, Korea, Singapore and Malaysia were closed for the CNY holidays. Sentiment remained on edge over (i) Fed’s wait-and-see mode on rate cuts amid sticky inflation; (ii) Trump’s tariff plan in Feb and possible tighter curbs on NVDA’s chips to China; (iii) mixed earnings results from MSFT and TSLA, along with (iv) growing uncertainty over the AI sector’s shake-up and stretched valuations, following the advent of a more efficient AI model from China’s DeepSeek. 

The Dow gained 168 pts to 44,881 in a choppy trade as investors digested a weak US 4Q24 GDP data and slew of mixed earnings from megacap stocks coupled with Trump's tariff threat. On earnings front, UPS and CAT earnings missed forecasts while META, IBM and AAPL (released after market) beat expectations. 

Malaysia. Ahead of the FOMC meeting, CNY holidays and persistent foreign outflows, KLCI fell 6.3 pts to 1,552.7, led by selloffs in MAYBANK, CIMB, YTLPOWR, IHH, MAXIS and PMETAL. Market breadth was negative for the 4th consecutive day at 0.69 whilst daily trading volume shrank 7.2% to 2.19bn shares valued At RM2bn. Foreign net outflows continued for the 19th day in Jan (-RM197m, Jan: -RM3.09bn) while local retailers (+RM158m, Jan: +RM1.13bn) alongside local institutions (+RM39m, Jan: +RM1.96bn) emerged as major net buyers.

Technical view After rebounding from a low at 1,545 (Jan 17) to a high at 1,590.8 (Jan 22), KLCI ended lower for a 4th day at 1,552.7, firmly back below the downtrend channel. We expect further retracement towards lower trendline near 1,545 and 1,535 (lower BB) before staging a sustainable technical rebound. On the upside, immediate hurdles are seen at 1,566 (76.4% FR) and 1,589 (61.8% FR) levels, with a confirmed breakout to aim for 1,600 and 1,613 (200D MA) zones.

Outlook In the wake of the external headwinds and negative KLCI technical readings, the index is likely to extend its consolidation (support: 1,535-1,545; resistance: 1.566-1,589-1,600), as investors will continue to assess: (i) Trump 2.0 policies; (ii) China’s economic challenges; (iii) lingering headwinds from the AI and DCs; (iv) continued foreign exodus, and (iv) upcoming Feb reporting season.

Following the Hammer pattern on Jan 28, SUNWAY (CP: RM4.31, BUY, TP:RM5.75) looks attractive to bargain for rebound upside towards 4.49 (38.2% FR) and RM4.66 (50D MA), with a confirmed breakout to aim for RM4.84 (1M high) and RM5.00 levels. Key retracement support levels are pegged at RM4.11 (Jan 28 low) and RM4.00.

Source: Hong Leong Investment Bank Research - 31 Jan 2025