MARKET REVIEW

Asia/US. Ahead of the key US CPI print tonight, Asian markets ended mixed, as gains in new energy stocks (following the US Senate approval of Climate Change Act) failed to wrest the losses in technology stocks (due to US moves to expand its high-tech export curbs against China and negative guidance by NVIDEA). Moreover, investors remained cautious about resurgent domestic Covid-19 outbreaks and simmering US-China tensions over Taiwan. Dow fell 58 pts to 32,774 as investors navigated the downbeat update from Micron technology and soaring US 2Q22 unit labour costs in non-farm business sector, coupled with the highly anticipated July CPI report tonight that will help shape the future path of Fed’s rate hikes in Sep.

Malaysia: After falling 11.7 pts in two days, KLCI eked out a 1.7-pt gain amid bargain hunting activities on selected banking, utilities and telco heavyweights. Market breadth (gainers/losers) remained negative but the ratio improved to 0.94 from 0.70 a day ago, supported by higher turnover at 2.52bn shares worth RM1.26bn.

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 consolidation for a 3rd day. Barring any sharp pullback below 1,475-1,483 supports, we reckon that the rally from 1,408 remains intact, and may revisit 1,512 (50% FR), 1,524 (100D MA) and 1,534 (200D MA) next after a brief consolidation. Conversely, a breakdown below the key supports may trigger further selldown toward 1,428-1,457 levels.

MARKET OUTLOOK

The local market should extend sideways trade amid the present cautious undertone after rallying 90 pts from 2Y low of 1,408 (14 July) to 1,498, as we brace for the ongoing Aug reporting season (to gauge how the labour shortage, rising raw material costs, higher minimum wage and supply chain issues affect corporate earnings) and latest update on US July CPI tonight (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 1,512-1,524-1,534 zones.

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of the market uncertainty, we decided to square off MEDIAC (-2.9% return) and EVERGRN (13% gain) yesterday.

Source: Hong Leong Investment Bank Research - 10 Aug 2022