MARKET REVIEW

Asia. Last Friday, Asian markets ended mixed after enjoying a strong rally on Thursday as investors weighed a technical recession in the US economy (advance 2Q22 print: -0.9%; 1Q22: -1.6%) and rising expectations that the Fed may need to slow down the pace of interest rate hikes in the upcoming Sep/Nov/Dec FOMC meetings. Dow jumped 316 pts at 32,845 (+3% WoW and +6.7% MoM) to record its 3rd straight gain, boosted by strong earnings from Apple, Amazon, Chevron and Exxon, overshadowing negative performance from Intel and P&G. Meanwhile, upbeat mode prevailed over a potential Fed policy pivot in light of a poor preliminary 2Q22 GDP, despite higher core PCE Deflator (the Fed’s preferred proxy for inflation) of 4.8% YoY in June (May: 4.7%). This week, July jobs data (consensus: +250k) will take centre stage as it could impact the calculus for Fed’s monetary policy. Earnings wise, key results slated are AMD, Starbucks, Warner Bros and Caterpillar.

Malaysia: In sync with a strong back-to-back Wall St rally and a resumption of foreigners’ net inflows, KLCI jumped as much as 6.3 pts before narrowing the gains to 1-pt at 1,492.2 (+1.8% WoW and +48 pts MoM). Market breadth (gainers/losers) retained its bullish tone at 1.45 albeit lower than 2.47 previously. Retailers continued its net selling for the 6th straight session (-RM44m, 5D: -RM81m, YTD: +RM1.54bn) whilst both foreigners (+RM19m, 5D: +RM132m, YTD: +RM6.22bn) and domestic institutions (+RM25m, 5D:-RM50m, YTD:- RM7.77bn) logged net buying trades last Friday.

TECHNICAL OUTLOOK: KLCI

Following a bullish neckline resistance breakout above 1,475 and refilled the 1,483-1,493 gap last Friday, KLCI is poised to surpass the long-awaited 1,500 psychological barrier this week. A successful breakout may increase the odds to retest 1,512 (50% FR) and 1,536 (200D MA) next. Immediate support is reset higher to 1,475 and 1,457 (23.6% FR), with 1,443 (20D MA) and 1,428 acting as stronger support buffers.

MARKET OUTLOOK

Tracking solid gains from Wall St last week, 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. However, after surging 84 pts from YTD low of 1,408, KLCI should ease into profit-taking consolidation in this week as we brace for the Aug results season, heightened worries over rapid global economic slowdown as central banks raise rates to wreck red-hot inflation, as well as rising US-China tension as Nancy Pelosi begins her Asian tour this week.

Source: Hong Leong Investment Bank Research - 1 Aug 2022