MARKET REVIEW

Global. Asian market ended mixed, weighed down by Apple’s news that it would limit hiring and spending growth in some divisions, bolstering fears of a looming global economic slowdown. On a positive note, China authorities’ effort to backstop the real estate sector cushioned further fall in market as investors speculated more stimulus measures going forward. Wall St rallied overnight (Dow: +2.43%; S&P 500: +2.76%; Nasdaq: +3.11%), as investors welcomed a slew of upbeat earnings reports and scaling back prospects of an an ultra-aggressive 100 bps rate hike during the 26-27 July FOMC meeting. Overall, signs of investors’ capitulation with deepening pessimism appearing to serve as a contrarian signal offering some near-term upside. According to a monthly BofA fund manager survey, investors slashed their exposure to risk assets to levels not seen even during the global financial crisis amid a 'dire' economic outlook.

Malaysia After hovering in the negative territory for most of the trading session, KLCI ended marginally lower to close at 1,428.76 (-0.78pts), with trading volume continued to stay lacklustre, signalling investors’ reluctance to make move aggressive move in the absence of buying interest. Market breadth turned negative to 0.76 as losers (431) outpaced winners (330). Foreigners resumed their net buying trades (+RM15m, 5D:+RM47m; YTD:+RM6.01bn), followed by retailers (+RM4m, 5D:-RM3m, YTD: +RM1.71bn), whilst the domestic institutions were the major net sellers (-RM19m, 5D:- RM25m, YTD: -RM7.73bn).

TECHNICAL OUTLOOK: KLCI

We reiterate our view that KLCI could stay in a range bound consolidation mode for a while, oscillating within 1400-1450 levels. A greater upside towards 1,460-1,475-1,500 targets would only happen after a successful breakout above the short-term hurdles at 20D/30 MA or 1,435-1,453 territory. Conversely, failure to defend the critical 1,400 psychological support would trigger a further slide towards 1360-1385 levels.

MARKET OUTLOOK

We expect the strong rally on Wall St overnight could spillover to Bursa Malaysia today, boosting KLCI to retest 1,435-1,453 levels. However, underlying sentiment should stay in cautious mode, reflected by the tepid average daily value traded (July:RM1.16bn; June:RM1.81bn), as we brace for the ongoing US 2Q22 results season and 26-27 July FOMC meeting, the expiry of government-PH MOU on 31 July, a resurgence of Covid cases and Bursa Malaysia upcoming Aug reporting season. In the absence of fresh catalysts KLCI trend could still remain choppy (supports: 1,385-1,400-1.408 levels).

Source: Hong Leong Investment Bank Research - 20 Jul 2022