MARKET REVIEW

Global. Ahead to the US June inflation report tonight and China 2Q22 GDP print (15 July), MSCI All Countries Asia Pacific index slid 1.11% to 154.95, as investors braced for US inflation data that could bolster the case for another aggressive rate hike from the Fed on 26-27 July FOMC meeting. Investors also turned jittery amid a resurgence of Covid cases in Japan and China coupled with the start of the US 2Q22 earnings season this week. Overnight, Dow plunged as much as 314 pts before narrowing the losses to -193 pts at 30,981, awaiting tonight’s CPI reading and the upcoming corporate earnings season. Meanwhile, Brent oil tumbled 7.1% to USD99.49 amid heightened recession fears.

Malaysia. Tracking lower regional markets, KLCI fell as much as 7.3 pts before rebounding to end +0.29-pt at 1,426.1. Market breadth (gainers/losers) retreated to 0.51 from 1.30 last Friday, closing <1 for the eight out of nine sessions. Foreigners turned net buyers for a 2nd day (+RM22m, 5D:-RM19m; YTD: +RM5.97bn), followed by retailers (+ RM38m, 5D: +RM100m, YTD: +RM1.71bn) whilst the domestic institutions were the major net sellers (- RM60m, 5D: -RM81m, YTD: -RM7.68bn).

TECHNICAL OUTLOOK: KLCI

After diving 194 pts from YTD high of 1,620 to a 2Y low of 1,426, KLCI may strive to find a firmer footing near 1,400-1,418 before staging a meaningful relief rally. A successful breakout above 1,441 barrier (20D MA) would spur the index towards 1,460 (1M high) and 1,476 neckline resistance, before heading to a formidable resistances at 1,500 levels. Conversely, a further breakdown below 1,400 could drag the index lower towards 1340- 1370 levels.

MARKET OUTLOOK

We expect Bursa Malaysia to remain in a consolidation mode (supports: 1,370-1,400-1,418; resistances: 1,441-1,460-1,476) in the absence of fresh catalysts, as it attempts to price in multi-layered of challenges such as (i) elevated inflation, (ii) capital outflows amid aggressive Fed, (iii) protracted Russia-Ukraine war, (iv) political overhang amid speculation of GE15 in 2H22, (v) looming US recession, (vi) paucity of earnings and GDP growth in 2H22, underpinned by recent government’s economic rationalization measures, soaring inflation and interest rates upcycle and (vii) a resurgence of Covid cases due to new variants.

Source: Hong Leong Investment Bank Research - 13 Jul 2022