MARKET REVIEW

Asia/US. Asian markets ended mildly higher in volatile sessions after a heavy selloff on Tuesday. Investors continued to assess some hawkish remarks from Fed officials and monitor closely a rising US-China tensions over Nancy Pelosi’s visit to Taiwan as well as reported news that China will conduct live military drills from 4 -7 Aug in areas around Taiwan. Overnight, Dow rallied 416 pts after a 2-day slide of 449 pts, on the back of upbeat July PMI services index (56.7, June: 55.3) and corporate earnings reports (i.e. Paypal, Moderna, Starbuck), as well as abating geopolitical tensions after Pelosi wrapped up her landmark visit to Taiwan. Meanwhile, the US 10Y Treasury yield slipped 4 bps at 2.70% as investors recalibrated expectations for the Fed’s rate-hike path following hawkish comments by several Fed officials and growing recessionary fears after the US 10Y -2Y yield curve inversion tumbled to -0.37, the lowest since Aug 2000.

Malaysia: Tracking the mixed regional markets, KLCI eased 4.5pts at 1,490.6, led by selling pressures on banking and utility stocks. In the wake of heightened US-China tension and Aug results season, average daily volume and value fell further to 1.91bn (-33%) shares valued at RM1.35bn (-16%). Market breadth (gainers/losers) remained was negative at 0.92, improving from 0.33 previously. Retailers (+RM5m, 5D: -RM107m, YTD: +RM1.49bn) and foreigners (+RM74m, 5D:+RM165m, YTD:+RM6.29bn) were the major net buyers whilst local institutions (-RM79m, 5D: -RM58m, YTD: -RM7.78bn) were the major net sellers.

TECHNICAL OUTLOOK: KLCI

KLCI fell for a 2nd day on healthy profit taking after rallying from 1,408 (2Y low) to 1,503. Barring a decisive fall below neckline support at 1,475, the bulls are still intact to revisit immediate upside at 1,500-1,512 levels. A successful breakout above 1,512 could lift the benchmark to stiffer hurdles at 1,528 (100D MA) and 1,536 (200D MA) levels. On the flip side, failure to defend the 1,475 support could trigger a further selldown towards stronger support buffers near 1,457 and 1446 areas

MARKET OUTLOOK

Tracking a solid rebound from Wall St overnight, KLCI may trend higher to revisit the crucial 1,500 hurdle. A successful breakout may spur greater upside towards 1,512-1,528-1,536 levels next. However, after surging 82 pts from 2Y low of 1,408, KLCI should ease into profit-taking consolidation 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 following Nancy Pelosi’s landmark visit to Taiwan recently.

Source: Hong Leong Investment Bank Research - 4 Aug 2022