MARKET REVIEW

Asia/US. Asian markets ended mixed, led by rising Covid-19 outbreaks in China and simmering US-China tensions coupled with a stellar US July jobs report that bolstered expectations for another sizeable Fed rate hike in September FOMC meeting, overshadowing a stronger-than-expected China July trade data. Ahead of the crucial July CPI print tomorrow and weakness in technology stocks (dampened by NVIDEA’s negative pre-announcement), Dow inched up 29 pts to 32,833 after surging as much as 307 pts in early session. Meanwhile, the 10Y-2Y inversion yield spread of -0.44 deepened to the lowest since Aug 2000, a widely cited recessionary signal.

Malaysia: In line with tepid regional markets after an upbeat US July non-farm payrolls that boosted the case for an ultra-aggressive 0.75% rate hike in Sep, KLCI lost 5.6 pts at 1,496. Market breadth (gainers/losers) slipped further to 0.70 from 0.94 previously whilst turnover fell to 2.19bn valued at RM1.33bn from 2.61bn shares worth RM1.61bn last Friday.

TECHNICAL OUTLOOK: KLCI

After skyrocketing almost 100 pts from 2Y low of 1,408 (14 July) to a high of 1507, KLCI succumbed to profit taking for a 2nd day, ending -5.5 pts at 1,496 yesterday. Barring any sharp pullback below 1,475-1,483 supports, we reckon that the rally from 1,408 remains intact, and may continue to revisit 1,512 (50% FR), 1,524 (100D MA) and 1,536 (61.8% FR) next after a brief consolidation. Conversely, a breakdown below the key supports may trigger further retracements toward 1,428-1,457 levels.

MARKET OUTLOOK

After rallying 88 pts from 2Y low of 1,408 (14 July) to 1,496, KLCI’s relief rebound could pause as we brace for the ongoing Aug reporting season and a latest update on US July CPI tomorrow (forecast: 8.7%; June: 9.1%). Meanwhile, expectations of a slower 2H22 GDP growth in Malaysia amid looming US recession and a stumbling growth in China, speculation of an early GE15 before Dec 2022 as well as rising US-China tensions may continue to dampen sentiment, capping upside near 1,512-1,525-1,536 zones.

Source: Hong Leong Investment Bank Research - 9 Aug 2022