MARKET REVIEW

Asia. MSCI All Countries Asia Pacific index fell 0.58% to 158.7 as investors are waiting for the Fed policy decision (26-27 July) as it remains committed to fighting inflation at the expense of growth. Sentiment was also cautious to assess the outlook for a string of US corporate earnings amid the hawkish Fed, scorching inflation and a looming recession (with preliminary 2Q22 GDP print on 28 July: +0.8%; 1Q22: -1.6%). The Dow swung between gains and losses before ending +91 pts at 31,990 as investors braced for key earnings for further clues about the economy’s health (from Apple, Microsoft, Alphabet, Amazon, and Meta Platforms) and the Fed meeting June: Meanwhile, the inversion between the 10Y-2Y yield spread of -0.19 remained at its most negative territory since 2000, fuelling recessionary worries.

Malaysia: Bucking lower regional markets, KLCI rose 3.4 pts to 1,469.2 to record its 4th day winning streak, lifted by buying interests on PBBANK, PETGAS, PCHEM, HLBANK, TM, and GENTING. After rising above 1 in the last three days, market breadth slipped to 0.57 vs 2.09 last Friday. Foreigners stayed as net buyers for the 3rd straight day (+RM25m, 5D:+RM117m; YTD:+RM6.12bn) vis-à-vis net selling trades by retailers (-RM14m, 5D:- RM97m, YTD: +RM1.61bn) and domestic institutions (-RM11m, 5D:-RM20m, YTD:- RM7.73bn).

TECHNICAL OUTLOOK: KLCI

Following a strong 3.3% relief rally last week to close above 10d/20d/30d MA, KLCI is poised to retest the key neckline resistance at 1,475 next, supported by bullish technicals. Upon a successful breakout, the benchmark may advance towards 1488 and 1,500 psychological levels before profit-taking emerges. Weekly supports are situated at 1,430- 1,442-1,458 levels.

MARKET OUTLOOK

Tracking a resumption of foreigners’ net inflows in July (RM36m, June: -RM1.36bn) and bullish technical indicators, KLCI may advance further to reclaim above key neckline resistance at 1,475 and refilling the 1,483-1,493 gap next. However, we expect formidable barriers at 1,500-1520 amid cautious market undertone (July average traded value: RM1.28bn; June: RM1.81bn) in the absence of fresh catalysts as investors recalibrate the highly-anticipated Fed policy outcome (forecast: 75 bps hike) and outlook, a resurgence of Covid cases and Bursa Malaysia upcoming Aug reporting season.

Source: Hong Leong Investment Bank Research - 26 Jul 2022