MARKET REVIEW

Asia. Asian markets ended mixed after recent oversold rebound as investors weighed crucial FOMC decision tomorrow and Walmart’s profit warning coupled with upcoming major earnings reports from Apple, Amazon and Meta due this week. Dow tumbled 228 pts to 31,761, taking cues from disappointing results from Walmart, GM and UPS, sluggish economic data from July consumer confidence index (17M low at 95.7) and sliding June new home sales (-8.1% MoM, forecast: -4.2%), overshadowing strong results from Coca Cola, McDonald’s, General Electric and 3M. Meanwhile, the inversion between 10Y-2Y yield spread of -0.21 remained at its most negative territory since 2000, fuelling recessionary worries.

Malaysia: After rallying 40.5 pts in four days, KLCI lost 5.5 pts at 1,463.7 ahead of the highly-anticipated Fed decision tomorrow. Market breadth stayed below 1 at 0.95 but improved from 0.57 a day ago. Foreigners turned net sellers (-RM14m, 5D:+RM81m; YTD:+RM6.1bn) after 3rd straight day of net buying, followed by retailers (-RM1m, 5D:- RM101m, YTD: +RM1.61bn) vis-à-vis net buying trades by domestic institutions (+RM15m, 5D:+RM20m, YTD:-RM7.7bn).

TECHNICAL OUTLOOK: KLCI

Following a 62-pt relief rally from a low of 1,408 (14 Jul) to a high of 1,469 (25 Jul), KLCI fell 5.5 pts yesterday to 1,463.7 on profit taking ahead of the Fed decision. Barring any sharp pullback below 30D MA near 1,442 levels, KLCI is still poised to retest the key neckline resistance at 1,475 next after a brief sideways consolidation (stiffer resistances: 1,487- 1,500). Conversely, a decisive breakdown below 1,442 could end the ongoing rebound, triggering further selldown to revisit 1,400-1,408-1,430 levels.

MARKET OUTLOOK

In the wake of Wall St rout overnight, KLCI may continue its sideways trend (supports: 1,440-1,450; resistance: 1,470-1,480) today with profit-taking interest stalling recent gains. In the near term, sentiment should stay cautious as market undertone remained tepid (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 looming recession (with preliminary US 2Q22 GDP print on 29 July: +0.8%; 1Q22: -1.6%), a resurgence of Covid cases and Bursa Malaysia upcoming Aug reporting season.

Source: Hong Leong Investment Bank Research - 27 Jul 2022