MARKET REVIEW

Asia/US. Tracking recent pullback in Nasdaq, Asian markets ended lower amid selldown in technology shares as investors weighed on the China July CPI (2.7%, forecast: 2.9%) and await the crucial US July CPI report that will help shape the future path of Fed’s rate hikes in Sep. Dow rallied 535 pts to 33,309, lifted by a softer-than-expected reading on July CPI print (8.5%, forecast: 8.7%) that could reduce bet for a more aggressive rate hike in the 20- 21 Sep FOMC meeting. Core CPI (excluding food and energy) climbed 5.9% but lower than forecast 6.1%, showing signs that inflation could be peaking followed a better-than-expected employment report last week, easing concerns about an imminent recession.

Malaysia: In sync with lower regional markets as investors braced for the crucial US July CPI report and Bursa Malaysia ongoing results season, KLCI lost 5.4 pts to 1,492.3 amid profit taking activities on selected banking, technology and glove heavyweights. Market breadth (gainers/losers) deteriorated to 0.40 from 0.94 a day ago whilst daily volume shrank to 14% to 2.17bn shares worth RM1.68bn.

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 4th 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), 1,523 (100D MA) and 1,533 (200D MA) next after a brief consolidation, reflected by the weakening MACD and RSI. Conversely, a breakdown below the key supports may trigger further selldown toward 1,428-1,457 levels.

MARKET OUTLOOK

In line with an overnight Wall St rally, KLCI could trend higher to revisit the stiff 1,500 to 1,512 (50% FR) overhead hurdles. Overall, underlying sentiment could stay cautious 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 Malaysia’s 2Q22 GDP print on 12 Aug. Meanwhile, expectations of a slower 2H22 GDP growth in Malaysia amid rising interest rates and global economic slowdown, speculation of an early GE15 before Dec 2022, as well as escalating US-China tensions may continue to dampen sentiment, capping upside near 1,523 (100D MA), 1,533 (200D MA) and 1,571 (76.4% FR) levels next.

Source: Hong Leong Investment Bank Research - 11 Aug 2022