MARKET REVIEW

Global. Tracking superb gains on US markets overnight, MSCI All Countries Asia Pacific index rallied 1.34% to 158.53, as investors scaled back bets for a bigger US rate hike during the 26-27 July FOMC meeting and upbeat corporate earnings allayed fears of a sharp economic slowdown. Dow recorded back-to-back gains of 48 pts (after a 755-pt rally a day before) at 31,875 whilst the Nasdaq outperformed with a 1.58% surge to 11,897, as the latest round of corporate earnings buoyed risk sentiment (10% of S&P 500 companies reported earnings with ~69% topping analyst expectations) and growing speculations that markets may have seen a capitulation, coupled with optimism that the Fed will take a more measured approach to policy tightening.

Malaysia In tandem with an overnight Wall St strong rally, KLCI jumped 8.2 pts to 1,437, lifted by bargain hunting interests on PCHEM, PETGAS, PMETAL, PBBANK, DIGI, MAYBANK and MAXIS. Market breadth turned bullish with the gainers/losers ratio surged to 2.22 from 0.77 a day ago. Foreigners stayed neutral yesterday (+RM0m, 5D:+RM129m; YTD:+RM6.02bn). The net selling trades by retailers (-RM6m, 5D:-RM42m, YTD: +RM1.71bn) were absorbed by domestic institutions (+RM6m, 5D:-RM86m, YTD:- RM7.72bn).

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 1,435-1,447 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 back-to-back gains on Wall St to spillover to Bursa Malaysia today, boosting KLCI to retest the 1,440-1,460 hurdles (supports: 1,385-1,400-1.408 levels). However, underlying sentiment should stay weak in the absence of fresh catalysts, reflected by the subdued average daily value traded (July: RM1.27bn; June: RM1.81bn; May: RM2.39bn), as investors weigh on the ongoing US 2Q22 results season and 26-27 July FOMC meeting, the end of MOU between Putrajaya-PH on 31 July, a resurgence of Covid cases and Bursa Malaysia upcoming Aug reporting season.

Source: Hong Leong Investment Bank Research - 21 Jul 2022