Global. Asian markets ended mixed as investors weighed on sluggish PMI reports from French and Germany, as well as Powell’s hawkish testimonial to Congress that achieving a "soft landing" will be "very challenging" due in part to factors outside of the Fed's control and noted a recession is "certainly a possibility”. After falling as much as 190 pts amid sluggish S&P Global US Composite PMI (June: 51.2; May: 53.6) and Powell’s 2nd day of hawkish congressional testimony, the Dow staged a 194-pt technical rebound to 30,677, led by technology and growth stocks as the US 10Y Treasuries declined ( -0.07% to 3.09%) amid heightened recession worries. Powell reiterated the Fed’s “unconditional” commitment to battling red-hot inflation in over four decades, and noted officials woul d be hesitant to lower rates until there was clear evidence of easing price pressures.
Malaysia. Tracking the mixed regional market, KLCI ended flat as investors took a wait and-see approach. Daily turnover and value shed 15% and 18% to 2.34bn shares worth RM1.56bn (the lowest since 31 Jan), respectively. Market breadth (gainers/losers) improved to 0.70 from 0.40 a day before. In a tepid trading session, retail investors were the biggest buyers (+RM37m, 5D: +RM149m; YTD: +RM1.4 7bn), followed by foreign institutions (+RM5m, 5D: -RM179m; YTD: +RM6.38bn), vis-à-vis net selling trades by local institutions (-RM42m; 5D: +RM30m; YTD: -RM7.86bn).
Following the bearish engulfing formation on 22 June and the violation of 1,476 neckline support, KLCI may witness further downside volatility, with major supports pegged at 1,395- 1,415 territory. On the upside, stiff resistances are situated at 1,453-1,476. A successful reclaim above 1,476 may spur the index to revisit 1,500-1,515 zones.
Despite potential spillover from Wall St rally overnight, we acknowledge that the internal and external headwinds will continue to buffet Bursa Malaysia as investors recalibrate risks around (i) elevated inflation, (ii) potential capital outflows amid aggressive Fed and QT, (iii) protracted Russia-Ukraine war, (iv) heightened US-China conflict, (v) political fluidity amid speculation of GE15 in 2H22 and (vi) the paucity of earnings and GDP growth in 2H22 following government’s recent subsidy rationalisation measures. Key supports are pegged at 1,395-1,415 whilst resistances are near 1,453-1,476-1,500 levels.
Source: Hong Leong Investment Bank Research - 24 Jun 2022