TA Sector Research

Daily Brief - 21 September 2023

Publish date: Thu, 21 Sep 2023, 09:29 AM

Sideways as Investors Digest US Rate Decision

The local market traded lower on Wednesday, matching weaker regional peers after China left benchmark lending rates unchanged and investors await the keenly anticipated US Federal Reserve decision on interest rates. The FBM KLCI fell 6.1 points to close at 1,451.56, off an early low of 1,450.37 and high of 1,456.77, but gainers led losers 537 to 423 on lower turnover of 3.55bn shares worth RM2.51bn.

Supports at 1,440/1,433; Resistance at 1,465/1,470

Stocks should extend sideways trade as investors digest the US Federal Reserve’s interest rate decision, amid worries the firm oil price trend will keep inflation elevated. Immediate index support cushioning downside stays at 1,440, followed by 1,433, with subsequently 1420/1,400 acting as stronger supports. Immediate overhead resistance remains at 1,465, then 1,470, with the 1,490/1,500 area as next resistance.

Bargain Supermax & Top Glove

Supermax need breakout confirmation above 88sen to fuel further upside towards 96sen and the 10/4/23 high (RM1.03), while the lower Bollinger band (75sen) cushions downside risk. Top Glove will need convincing breakout above the 200-day ma (90sen) to promote further recovery towards 95sen and RM1.10 ahead, with downside similarly cushioned by the lower Bollinger band (74sen).

Asian Markets Fall on Fed Hawkish Rate Concerns

Stocks in Asia were on the backfoot Wednesday as traders awaited the Federal Reserve’s next policy decision, with interest rates expected to be higher for longer to curb inflation. Fed Chair Jerome Powell and his colleagues are widely expected to hold rates Wednesday. Still, supply shocks such as climbing oil prices present the central bank with a quandary as they simultaneously boost inflation and curb economic growth. Surging energy costs played a role in tipping the US into recession in the mid-1970s, as well as the early 1980s and 1990s. Aside from expectations of a hawkish hold, investors will focus on the Fed’s updated quarterly rate projections, known as the dot plot that will be released at the conclusion of the policy meeting.

On economics news, China’s one-year and five-year loan prime rates were held at 3.45% and 4.2% respectively. The region also saw August trade data out from Japan, while wholesale inflation in South Korea jumped for the first time since July 2022. In Australia, the S&P/ASX 200 fell 0.46% to end at 7,163.3, also notching a third straight day of losses. Japan’s Nikkei 225 was down 0.66% to close at 33,023.78, while the Topix lost 1% and marked a three-day losing streak. Hong Kong’s Hang Seng index slumped 0.62% to 17,885.60, and the Shanghai composite lost 0.52% to 3,108.57. In contrast, South Korea’s Kospi closed 0.02% higher at 2,559.77, bucking the wider sell-off, but the Kosdaq was down 0.13% to 882.72.

Wall Street Slumps as Traders Absorb Hawkish Fed Rate Message

Wall Street's main indexes fell sharply overnight after Federal Reserve voted to hold interest rates steady at a 22-year high and signaled they were prepared to raise rates once more this year to combat inflation. The Dow Jones Industrial Average lost 0.22% to 34,440.88. The S&P 500 dropped 0.94% to 4,402.20, while the Nasdaq Composite slid 1.53% to 13,469.13. The three major indexes closed at session lows. The late-day sell-off on Wall Street came after the Federal Reserve announced its widely expected decision to leave interest rates unchanged but raised its forecast for rates at the end of next year. Federal Reserve officials voted to hold interest rates steady at a 22-year high and signaled they were prepared to raise rates once more this year to combat inflation.

At the subsequent press conference, Fed Chairman Jerome Powell tempered rosier economic projections with a warning that inflation has a long way to go before reaching that target. Tech stocks dragged in the session, with information technology and communication services the two worst-performing sectors in the S&P 500. The U.S. 2-year Treasury yield jumped to its highest level since July 2006, while the 10-year Treasury yield reached a high not seen since November 2007. Those moves raised concerns about the impact of higher rates and likely put pressure on tech stocks.

Source: TA Research - 21 Sept 2023

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