The local blue-chip benchmark index touched a 14-month high last week, prior to profit-taking correction triggered by overbought momentum and recent strong gains, which encouraged market players to reduce trading commitments.
Stocks continued to range bound and attempted to rebuild support and further ease overbought momentum ahead of the weekend, as investors awaited the US December producer inflation data and key corporate earnings for leads.
Week-on-week, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) ended flat at 1,487.34 (-0.27), with gains from YTL Power (+46sen), YTL Corp (+14sen), Sime Darby (+10sen) and TM (+12sen)
countered by falls on Petronas Chemicals (-28sen), CIMB (-8sen), Tenaga (-16sen) and Public Bank (-3sen).
Average daily traded volume last week stayed elevated at 5.42 billion shares, compared to 5.88 billion shares
the previous week, while average daily traded value rose to RM3.33 billion, against the RM3.17 billion average
the previous week.
The FBMKLCI is expected to go through a healthy consolidation this week while waiting for positive news flows from abroad and locally after last week's December inflation data in the US pointed to a likely delay in the monetary policy easing, unabated deflationary pressure in China increased expectations for a more aggressive policy interventions ahead of the National People's Congress on the 5 th March, and the meeting between the prime ministers of Malaysia and Singapore last week fortified hopes for greater cooperation on the socioeconomic front and infrastructure development, especially in Johor, which will be strengthened further by the ascension of the new King on Jan 31, 2024.
Cautious mood in the immediate term could also drive the consolidation phase, with buying support from local institutions, after attacks by the UK and US task force on Houthi controlled installations in Yemen invoked concerns about stronger retaliations that could destabilise the Middle East and boost energy prices. Brent crude oil has regained some momentum after the strikes and closed above the USD78/barrel last week and could retest the USD93/barrel level last seen after the Hamas attack on Israel last October.
While this could revive buying interest in domestic oil and gas stocks, an escalation in this conflict will also contribute to inflationary pressure and delay interest rate cut expectations in the US.
The Beige Book report this Wednesday should provide more clues on the current US economy and policy direction.
All eyes will be on China central bank's decision today on the 1-year Medium-Term Lending Facility Rate after deflationary pressures sustained a decline in consumer prices for third straight month in December, the longest streak since 2009, while exports posted its first annual decline in seven years. Consensus is expecting a 10-basis point cut to 2.4 per cent in the loan rate.
Besides that, China is also due to announce other important economic data this week, which include the fourth quarter gross domestic product (GDP) that is forecast to grow by 5.2 per cent YoY versus 4.9 per cent YoY in the third quarter, and the industrial production (6.8 per cent YoY) and retail sales (8.0 per cent YoY) for December.
Locally, the trade data for December and the Statistics Department's advance estimate of Malaysia's fourth quarter GDP are due this Friday.
Last week's Industrial Production Index (IPI) for November that showed an expansion of 0.6 per cent YoY, following October's 2.4 per cent YoY, provided a glimmer of hope for the fourth quarter GDP to come in at 4.3 per cent YoY based on consensus forecast versus 3.3 per cent YoY in the third quarter.
To recall, the IPI contracted by -0.04 per cent in the third quarter, a notable decline from the +12.2 per cent recorded in the same quarter in 2022.
Meanwhile, consensus is expecting the year-on-year contraction in exports to narrow further to -2.8 per cent in December from -5.2 per cent in the first two months of the fourth quarter.
Technical Outlook
Blue chips climbed on Monday, led by construction, utility, plantation and oil & gas heavyweights, as trading momentum persisted on economic recovery and infrastructure plays.
The FBM KLCI rose 8.09 points to close at 1,495.70, off an opening low of 1,488.60 and high of 1,498.52, as gainers led losers 628 to 470 on robust trade totalling 6.96bn shares worth RM4.21 billion.
Stocks fell for profit-taking pullback on Tuesday, as overbought momentum and recent strong gains encouraged market players to reduce trading commitments.
The FBM KLCI added 3.13 points to settle at 1,498.83, off an early high of 1,503.93 and low of 1,496.84, as losers beat gainers 605 to 410 on strong turnover of 6.44 billion shares worth RM3.76 billion.
The local market fell for profit-taking correction on Wednesday, as overbought conditions and recent sharp gains encouraged investors to take profits on trading positions. The FBM KLCI lost 11.97 points to end near session lows at 1,486.86, off an opening high of 1,497.80, as losers beat gainers 588 to 359 on lower turnover of 4.97 billion shares worth RM2.84 billion.
Stocks extended profit-taking consolidation on Thursday, as market players continued to take profits and consolidate trading positions.
The FBM KLCI slid 3.86 points to close at the day's low of 1,483.00, off an early high of 1,492.44, as losers beat gainers 568 to 406 on lower trade totalling 4.64 billion shares worth RM3 billion.
The local market continued to range bound and attempted to rebuild support and further ease overbought momentum on Friday, as investors awaited the US December producer inflation data and key corporate earnings for leads.
The index recouped 4.34 points to end at the day's high of 1,487.34, off an early low of 1,482.02, as gainers narrowly edged losers 492 to 486 on slower trade of 4.07 billion shares worth RM2.83 billion.
Trading range for the blue-chip benchmark index last week halved to 21.91 points, compared to the 41.25-point range the previous week, as it peaked at a fresh 14-month high prior to profit-taking pullback.
For the week, the FBM-EMAS Index inched up by 19.63 points, or 0.18 percent to 11,116.85, while the FBM-Small Cap Index added 64.13 points, or 0.38 percent to 16,974.66.
Last week's profit-taking pullback from a 14-month high has forced a hook-down on the overbought daily slow stochastics momentum indicator on the FBM KLCI, while the weekly stochastics remained overbought.
The 14-day Relative Strength Index (RSI) indicator has also hooked down to neutralize its prior overbought condition, but the 14-week RSI indicator's hook-up persisted to sustain positive technical momentum.
On trend indicators, the daily Moving Average Convergence Divergence (MACD) trigger line is beginning to level after triggering a buy the previous week, but the weekly indicator's signal line extended higher to reinforce the uptrend. The +DI and -DI lines on the 14-day Directional Movement Index (DMI) trend indicator narrowed back while retaining its recent buy trigger, with the ADX line inching up for a trending signal.
Conclusion
The profit-taking pullback from a 14-month high last week managed to neutralise short-term overbought momentum on the FBM KLCI, while trend indicators remained positive, which suggest that the uptrend is still intact.
A near-term profit-taking consolidation phase is preferred and will be healthy to consolidate recent gains and sustain further uptrend ahead. Meantime, on the external front, inflation jitters should be contained following the tamer US December wholesale inflation data released last Friday, offsetting the higher-than-expected consumer inflation numbers a day earlier.
As for the index, immediate overhead resistance will be at the 1,500/1,510 area, which restricted upside in January 2023, with next key hurdles seen at 1,520 and 1,550. Immediate chart support is at 1,480, with better supports at 1,450/1,440 and 1,430, and 1,400/1,390 acting as stronger support platform.
As for stocks picks for this week, key telco, utility, construction and oil & gas related counters such as Maxis, Tenaga, Gadang, Gamuda, Dialog, Hibiscus Petroleum and Wasco should attract investors looking for situational plays, given the elevated global oil price due to the volatile geopolitical situation in the Middle East.
