MARKET REVIEW

Global. MSCI All Countries Asia Pacific index rallied 1.4% to 156.34 after tumbling 2.85% WoW, as sentiment was lifted by expectations that the Fed will deliver a 75bps rate hike instead of an ultra-aggressive 100bps and China's pledge to "increase implementation of prudent monetary policy" to support the real economy. Despite scaling back prospects of an outsized interest rate hike of 100 bps on 26-27 July FOMC meeting and upbeat results from Goldman Sachs and Bank of America, Dow surrendered an early gain of 356 pts to end 215 pts lower at 31,072. Overall, wild swings prevail as investors weighed the looming recession (the inversion in the 10Y-2Y yield curve was -0.19%, near Sep 2000 low) amid high inflation and soaring interest rates, Bloomberg news that Apple intends to slow hiring and spending growth in some divisions next year to prepare for a possible economic slowdown, and a flood of 2Q22 earnings results this week (i.e. Johnson & Johnson, IBM, Hasbro, Netflix, Tesla, United Airlines, American Airlines etc).

Malaysia. Tracking a rebound in regional markets, KLCI jumped 11.1 pts to 1,429.5 after losing 7.3 pts WoW, led by renewed bargain hunting interests by foreigners on depressed plantation, energy, technology and industrial products heavyweights. Market breadth recovered to 1.55 after falling below 1 in the last four sessions. After a lacklustre holiday shortened week, foreign investors logging net buying trades (+RM82m, 5D:+RM54m, YTD:+RM6.0bn) to match the net selling flows from local institutions (-RM60m, 5D:- RM85m, YTD:-RM7.7bn) and retailers (-RM22m, 5D:+RM32m, YTD: +RM1.7bn).

TECHNICAL OUTLOOK: KLCI

Despite an oversold position after sliding 190 pts from YTD high of 1,620, KLCI could still engage in a consolidation mode, unless clearing the short term hurdles near 20D/30 MA/1,435-1,453 successfully. A successful breakout above the said barriers may spur greater upside towards 1,460-1,475 zones. Conversely, failure to defend the critical 1,400 psychological support would trigger further slide towards 1360-1385 levels.

MARKET OUTLOOK

In the absence of fresh catalysts, KLCI near term outlook could stay choppy and further oversold rebound may be capped near 1.440-1,460 zones (key supports: 1,385-1,400), as we navigate the US 2Q22 results season and 26-27 July FOMC meeting, the expiry of government-PH MOU on 31 July, Bursa Malaysia upcoming Aug reporting and a resurgence of Covid cases.

Source: Hong Leong Investment Bank Research - 19 Jul 2022