MARKET REVIEW

Asia/US. Tracking U.S lacklustre performance and sluggish manufacturing data in major economies highlighted the darkening economic outlook, Asian markets ended mostly lower with HSI (-2.36% or -476 pts) and SHCOMP (-2.26% or -73.6 pts) leading the losses. Market sentiment was also weighed by escalating US-China geopolitical tensions stemming from Nancy Pelosi’s trip to Taiwan despite objections from China. Overnight, Dow ended 402pts lower to 32,396 while Nasdaq corrected 20.2pts to 12,348 as industrial bellwether Caterpillar posted a weaker-than-expected revenue and warned of a demand slowdown in China. The escalating U.S.-China tension has also dampened risk-appetize, resulting in U.S treasury yields edging higher to 2.748 (+0.007 or +0.27%). The key focus will be on the July jobs data on Friday (consensus: +250k) as it could impact the Fed’s monetary policy calculus.

Malaysia: Tracking regional market performance, KLCI closed 7 pts lower to 1,495.1. Market breadth (gainers/losers) turned bearish to 0.32 from 1.54 yesterday, with 698 losers outpacing 228 gainer. Retailers (-RM29m, 5D: -RM125m, YTD: +RM1.48bn) and foreigners (-RM37m, 5D: +RM137m, YTD:-RM6.21bn) were the major net sellers whilst local institution (+RM66m, 5D: -RM12m, YTD: -RM7.70bn) being the net buyer.

TECHNICAL OUTLOOK: KLCI

After failing to close above 1,500 psychological levels, there is a growing chance that KLCI might stage a trend reversal toward immediate support of 1,475 -1,487, underpinned by weakness in technical indicators. Failure to defend these levels could trigger a further selldown towards 1,457 and 1446 areas. On the flip side, a successful breakout above 1,512 could spur the index toward 1,528 and 1,536 levels.

MARKET OUTLOOK

The renewed heightened US-China geopolitical tensions amid Pelosi’s planned landmark visit to Taiwan could incite a perceived risk off tone in markets, on top of existing headwinds such as (i) prolonged Russia-Ukraine war; (ii) potential global economic slowdown; and (iii) Bursa Malaysia Aug reporting season. Hence, we expect further profit taking pullback to take place in the short term (supports: 1,457-1,475) after surging 87 pts from YTD low of 1,408.

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of the grossly overbought indicators, we decided to square off AFFIN (+9.8% return) yesterday.

Source: Hong Leong Investment Bank Research - 3 Aug 2022