MARKET REVIEW

Asia/US. Asian markets ended mixed following Thursday’s rally as investors mulled the latest lower-than-expected US July CPI and Fed officials’ hawkish comments for further rate hikes despite softening inflation. Dow rallied 424 pts to 33,761 (+958 pts WoW), riding the wave of easing inflation, decelerating pace of Fed’s tightening policy amid softer -than expected reading on July CPI, improving Aug consumer sentiment index coupled with further decline in 1Y inflation expectations. On the other hand, a deep inversion of the U.S. Treasury yield curve still flagged the risk of a looming recession.

Malaysia: After rising as much as 6.2 pts to 1,511.8 (c.104 pts from 2Y bottom 1,408), KLCI gave back most of the gains to end flat (+0.6-pt to 1,506.2), led by profit taking activities on HARTA, TOPGLOV, PMETAL, MRDIY, MISC and GENM. Market breadth (gainers/losers) stayed positive at 1.20 albeit lower than 2.42 a day ago whilst daily volume and value shrank to 18% and 17% to 2.08bn shares worth RM1.63bn.

TECHNICAL OUTLOOK: KLCI

After skyrocketing 98 pts from 2Y low of 1,408 (14 July) to close at 1506 last Friday (+4.6 pts WoW), KLCI may succumb to profit taking pullback this week, reflected by the potential shooting star formation. Nevertheless, barring any sharp breakdown below 1,475-1,487 supports, we reckon that the rally from 1,408 remains intact, and may spur KLCI towards 1,512 (50% FR), 1,522 (100D MA) and 1,532 (200D MA) after a brief consolidation. Conversely, a sharp fall below the said supports may drive the index lower to 1,428-1,457 levels.

MARKET OUTLOOK

The overnight Wall St rally last Friday may spillover to Bursa Malaysia today, spurring KLCI to revisit 1,512–1,522 barriers. However, ongoing Aug reporting season (to gauge how the labour shortage, rising raw material costs, higher minimum wage and supply chain issues affect corporate earnings), a cautious 2H22 Malaysia GDP outlook (amid rising interest rates, economic rationalisation measures, global economic slowdown), speculation of an early GE15, as well as escalating US-China tensions, further upside may be capped at 1,532-1,550 hurdles. On Wall St, Dow could consolidate its recent gains (+13.8% from 52W low) as investors assess the July FOMC minutes, a flurry of key US July retail sales and housing market data (i.e. building permits, housing starts, and existing home sales) as well as results from key retailers (i.e. Home Depot, Walmart, Lowe’s Target) and technology giants (Cisco, Agilent, Applied materials).

Source: Hong Leong Investment Bank Research - 15 Aug 2022