MARKET REVIEW

Asia/US. Tracking overnight Wall St rally, Asian markets ended stronger as the softer -than expected reading on July CPI print (8.5%, forecast: 8.7%) that could reduce chances for a more aggressive rate hike in the 20-21 Sep FOMC meeting, boosted the market sentiment. Overnight, although July PPI showed a surprise decline from June (+9.8% YoY vs June: +10.4% YoY), Dow closed flat at 33,376 (+27.16 pts or +0.08%) whilst Nasdaq ( -74.8 pts or -0.58%) ended slightly lower at 12,779 as the rising 10-Y US yield (2.89%, +0.11%) dampened tech stocks. Nevertheless, bets that the Federal Reserve isn’t likely to dramatically step up the pace of monetary policy continue to gain traction, with the odds of a 75 basis point hike in September falling to 19% from 34% a day earlier.

Malaysia: Tracking the regional market, KLCI ended 13pts higher to 1505.6, led by the strong rebound in heavyweights such as PMETAL, INARI, DIALOG and HLFG. In line with the overnight Nasdaq rally, KLTECH advanced 4.2% to 67.1, with PENTA, FRONTKN and UWC being the top performers. Market breadth (gainers/losers) improved to 2.41 from 0.40 a day ago in tandem with higher daily volume of 2.54bn (+17%) worth RM1.96bn (+16%).

TECHNICAL OUTLOOK: KLCI

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

The recent rally in Wall St due to the slightly eased inflation date is expected to spur KLCI to revisit the stiff 1,500 to 1,512 (50% FR) overhead hurdles, posting a short-term trading opportunity in Bursa Malaysia. Over the mid-term, however, 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 - 12 Aug 2022