The local blue-chip benchmark index climbed for a fifth straight session to chart a 17-month high last Friday, with healthcare, construction and oil & gas heavyweights leading gains as rotational and infrastructure plays highlighted trade.
The utility, construction and property sectors were the top gainers last week, given the optimism over infrastructure plays, while the oversold rebound and light bargain hunting interest on small cap stocks reversed some of the heavy losses suffered from the recent limit-down falls.
Week-on-week, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) rose 19.91 points, or 1.34 percent, to 1,506.28, as gains on CIMB (+17sen), YTL Corp +27sen), YTL Power (+36sen) and Maybank (+11sen) overcame falls on Sime Darby Plantations (-10sen) and Petronas Chemicals (-8sen). Average daily traded volume last week was lower at 4.8 billion shares, compared to 5.51 billion shares the previous week, while average daily traded value eased to RM3.19 billion, against the RM3.24 billion average the previous week.
Unexpected fast recovery in lower liners that were hit by limit downs in their share prices the previous week, strong buying interest from foreigners, and China's surprise 50 basis points cut in the reserve requirement ratio effective 5 February and indications that will engage more tools to revive economic growth, if necessary, contributed to the better market sentiment and lifted the benchmark FBM KLCI last week.
With prospects of Bank of China and the Chinese government taking more concrete actions to broaden and deepen consumption this year increasing and the likelihood of the US skirting a recession due to the strong labour market and a likely monetary easing, probably in May or June, optimism about the positive implications on Malaysia is also on the rise.
These expectations along with domestic developments in Malaysia could sustain the positive local market sentiment while investors await fresh catalysts to prop up the market further.
In China, its Purchasing Managers' Indices (PMI) for January this Wednesday could shed some light about domestic and external demand after last week's data showed its industrial profits rose 16.8 per cent year-on-year (YoY) in December, down from a 29.5 per cent increase in November, but extended gains for a fifth month that led to a lower contraction of 2.3 per cent for the full year.
Looking ahead, the PMI and industrial profit numbers are expected to improve with better demand and restocking activities.
That aside, the global PMI data this Thursday should also provide some insight on the impact of Red Sea shipping disruptions to manufacturing supply chains and prices.
As for the US, focus this week will be on the Federal Reserve's guidance in the two-day meeting that will end this Wednesday and the labour data on Friday.
This is after the stronger than expected annualised 4Q23 GDP of 3.3 per cent and softer than expected December core personal expenditure of 2.9 per cent YoY versus forecast 3.0 per cent YoY provided more flexibility for the central bank to decide on the timing of interest rate cut.
Market expectations for a rate cut has shifted recently from March to May, but a sustained strength in the nonfarm payrolls data and an increase in input costs due to shipping delays in the Red Sea could affect the Fed pivot expectations, if current conditions persist.
Domestically, no major economic data is due this week apart from the S&P Global Malaysia Manufacturing PMI for January, which is expected to remain below the 50 thresholds but could improve slightly versus the 47.9 recorded in the previous month due to improved demand and production.
That aside, the ascension of Sultan of Johor as the 17 th Yang Di-Pertuan Agong of Malaysia this Wednesday is seen in a positive light to render political stability until the current parliament is dissolved automatically in December 2027, besides attracting sizeable investments from Singapore and China.
Technical Outlook
Bursa Malaysia shares rose on Monday, led by the utility, construction and property sectors, as optimism over infrastructure plays offset concerns over the limit-down losses on certain small cap stocks.
The FBM KLCI gained 4.82 points to close at 1,491.19, off an early low of 1,485.51 and high of 1,493.98, as gainers led losers 644 to 375 on total turnover of 4.79bn shares worth RM3.12bn.
Stocks rose further on Tuesday, with certain small caps recouping some of their recent heavy losses due to oversold rebound and light bargain hunting interest. The FBM KLCI added 4.92 points to settle at 1,496.11, off an early low of 1,490.2 and high of 1,500.39, as gainers led losers 511 to 470 on higher turnover of 5.16bn shares worth RM3.33bn.
Gains in property, utility and oil & gas heavyweights lifted the local benchmark index to close at a fresh 17-month high above 1,500 on Wednesday. The FBM KLCI climbed 7.99 points to end near session highs at 1,504.10, off an opening low of 1,497.16, as gainers led losers 690 to 360 on lower turnover of 4.34bn shares worth RM2.87bn.
The local blue-chip benchmark rose a fifth straight session to another fresh 17-month high on Friday, shored up by gains in healthcare, construction and oil & gas heavyweights, as rotational and infrastructure plays highlighted trading.
The index added 2.18 points to close at 1,506.28, off an early low of 1,502.89 and high of 1,509.39, as gainers led losers 580 to 477 on steady turnover totalling 4.92bn shares worth RM3.42bn.
Trading range for the blue-chip benchmark index last week stabilized at 23.88 points, compared to the 26.68-point range the previous week.
For the week, the FBM-EMAS Index gained 167.63 points, or 1.51 percent to 11,232.79, while the FBM-Small Cap Index climbed 515.77 points, or 3.15 percent to 16,896.04.
On technical indicators, the strong comeback by the FBM KLCI to trade above the 1,500 level reversed the daily slow stochastics momentum indicator's prior sell signal, while the weekly indicator inched deeper into overbought territory.
The 14-day Relative Strength Index (RSI) indicator hooked back up into positive territory, while the 14-week RSI indicator spiked upwards to reinforce the bullish technical momentum.
On trend indicators, the daily Moving Average Convergence Divergence (MACD) trigger line also hooked back up after touching the MACD line, while the weekly indicator's signal line extended higher to retain its positive trend.
The +DI and -DI lines on the 14-day Directional Movement Index (DMI) trend indicator registered bullish expansion on a rising ADX line, signalling a return to uptrend mode.
Conclusion
With the FBM KLCI currently at the highest point in more than a year, and technical indicators reversing into positive mode, it will be crucial for positive domestic catalysts to resurface and sustain further uptrend ahead.
Note that recent news flow on infrastructure, such as the proposed high speed rail from KL to Singapore and the Johor/Singapore Special Economic Zone should gain momentum going into February, with the new Agong to be sworn in likely to act as the catalyst to attract stronger investor participation.
For the index, a convincing break above the 1,500/1,510 resistance zone, which capped upside in Jan 2023, should aim for next key hurdles at 1,520 and 1,550. Key chart supports cushioning downside will be at 1,479, 1,471 and 1,459, the respective 30-day, 50-day and 100-day moving averages.
As for stocks picks this week, key gaming, banking and rubber glove related counters such as Genting Bhd, Genting Malaysia, Maybank, Public Bank, Hartalega, Kossan Rubber, Supermax and Top Glove should continue to attract bargain hunters on active rotational plays.
