MARKET REVIEW

Asia. Tracking overnight slide on Wall St, MSCI All Countries Asia Pacific index shed 0.22% to 158.78 yesterday, as investors assessed the ongoing US results season and pending the FOMC decision this morning for leads, as well as IMF’s further downgrade on global GDP growth for 2022-2023. Sentiment was also dampened by China’s unabated Covid cases, property crisis and rapid economic slowdown worries. Overnight, Wall St (Dow: +1.37% to 32,197; Nasdaq: +4.06% to 12,032) enjoyed a strong rally, taking cues from better-than-expected results from Microsoft, Alphabet and Texas Instruments. Sentiment was also boosted by Fed’s rejection on speculation that the US economy is in recession and expectations the Fed will slow the pace of increases at some point and will be looking for moderately restrictive level by the end of the year (i.e 3.0-3.5% level), after raising the FFR by 75 bps to 2.25%-2.5%.

Malaysia: In the wake of a resumption of foreign net inflows in the last four out of five sessions, KLCI jumped 7 pts to 1,470.7. Market breadth turned positive at 1.36 against 0.95 a day ago. Foreigners turned net buyers (+RM51m, 5D: +RM150m; YTD: +RM6.15bn), vis-à-vis net selling trades by retailers (-RM14m, 5D: -RM109m, YTD: +RM1.60bn) and domestic institutions (-RM37m, 5D:-RM41m, YTD:-RM7.74bn).

TECHNICAL OUTLOOK: KLCI

Taking cue from a strong Wall St rally overnight, KLCI is still poised to retest the key neckline resistance at 1,475 today. A successful breakout may spur greater upside towards 1,487 (38.2% FR) to 1,500 zones. Conversely, failure to defend the 1,439 (20D MA) and 1,457 (23.6% FR) could end the ongoing rebound, triggering further selldown to revisit 1,400-1,408 levels.

MARKET OUTLOOK

In tandem with a meaningful rally from Wall St overnight, KLCI could trend higher to revisit our envisaged 1,475-1,487-1,500 hurdles. Nevertheless, sentiment should stay cautious as market undertone remained weak (July average traded value: RM1.28bn; June: RM1.81bn) in the absence of fresh catalysts, as investors brace for the global central banks aggressive tightening cycles, a resurgence of Covid cases and Bursa Malaysia upcoming Aug reporting season.

Source: Hong Leong Investment Bank Research - 28 Jul 2022