MARKET REVIEW

Asia. Tracking the back-to-back rally from Wall St, MSCI All Countries Asia Pacific index soared 1.15% to 160.61 amid enthusiasm that the Fed will pivot from its hawkish stance in the upcoming Sep/Nov/Dec FOMC meetings, after Powell said the Fed will likely become appropriate to slow the pace of increases while assessing how the recent cumulative policy adjustments are affecting the economy and inflation. Overnight, Wall St (Dow: +1.03% to 32,530; Nasdaq:+1.08% to 12,162) extended its rally, as hope of a downbeat US 2Q22 GDP (-0.9%, 1Q22: -1.6%) flagged the possibility of a technical recession would result in a more dovish Fed moving forward, underpinned by rapidly slowing growth and easing inflation expectations by the University Michigan data. In earnings, Meta and Intel share prices fell on poor earnings whilst Nasdaq futures jumped amid strong results from Amazon and Apple after the bell.

Malaysia: In tandem with an overnight Wall St rally and strong foreigners’ net inflows, KLCI surged 20.5 pts to 1,491.2, led by bargain hunting interests on PCHEM, PMETAL, AXIATA, MAXIS PBBANK and DIGI. Market breadth (gainers/losers) turned bullish for a 2nd day at 2.47 vs 1.36 a day ago. Foreigners were the major net buyers (+RM62m, 5D: +RM186m; YTD: +RM6.21bn) vis-à-vis net selling trades by retailers (-RM10m, 5D: -RM96m, YTD: +RM1.59bn) and domestic institutions (-RM52m, 5D:-RM90m, YTD:-RM7.79bn).

TECHNICAL OUTLOOK: KLCI

Taking cue from a strong back-to-back rally from Wall St, KLCI is poised to surpass the long-awaited 1,500 psychological barrier today. A successful breakout may spur greater upside towards 1,512 (50% FR), 1,536 (200D MA) and 1,566 (23.6% FR) zones next. Conversely, failure to defend the 1,475 (neckline) and 1,457 (23.6% FR) could end the ongoing rebound, triggering further retracement towards 1,420-1,440 levels.

MARKET OUTLOOK

In tandem with a meaningful back-to-back rally from Wall St overnight, KLCI could trend higher to revisit our long-awaited 1,500 psychological barrier. A successful breakout may spur greater upside towards 1,512 (50% FR) and 1,536 (200D MA) levels next. Nevertheless, sentiment should stay cautious as market undertone remained weak (July average traded value: RM1.31bn; June: RM1.81bn) in the absence of fresh catalysts, as investors brace for the global central banks interest rates’ upcycle, rising Covid cases and Bursa Malaysia upcoming Aug reporting season.

Source: Hong Leong Investment Bank Research - 29 Jul 2022