MARKET REVIEW

Asia/US. Asian markets ended mixed as investors weighed on the easing US inflationary pressures and disappointing July industrial output, retail sales and investment in China while the PBOC unexpectedly slashed key interest rates. Shrugging off the dismal economic data from China and sluggish data from the US Aug homebuilder sentiment and empire manufacturing surveys, the Dow ended +151 pts to 33,912 after tumbling as much as 178 pts in early trades, riding the wave of easing inflation and reduced bet for the size of the Fed policy tightening during the 20-21 Sep FOMC meeting.

Malaysia: Tracking a cautious mode in regional markets, KLCI continued its consolidation mode to end -2.2 pts at 1,504, led by selldown in MAYBANK, SIMEPLT, HARTA, TOPGLOV and PMETAL. Market breadth (gainers/losers) slid to 0.64 from 1.20 last Friday whilst daily volume and value jumped 22% and 6% to 2.54bn shares worth RM1.73bn.

TECHNICAL OUTLOOK: KLCI

After skyrocketing 104 pts from 2Y low of 1,408 (14 July) to 1,512 last Friday, KLCI lost 8 pts to end at 1,504 yesterday, underpinned by waning momentum from RSI and MACD indicators. 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), 1,521 (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

Another strong performance from Wall St overnight could spillover to Bursa Malaysia today, prompting KLCI to revisit 1,512–1,521 barriers. However, lingering headwinds such as ongoing Aug reporting season, a cautious 2H22 and 2023 Malaysia GDP outlook despite a strong 2Q22 GDP print (amid rising interest rates, economic rationalisation measures, global economic slowdown), speculation of an early GE15, as well as escalating US-China tensions may continue to cap further rally at 1,532-1,550 hurdles. On Wall St, Dow could consolidate its recent gains (+14.3% from recent trough 29,654) soon as investors assess housing market data 16 Aug (i.e. building permits, housing starts, and existing home sales), July FOMC minutes and key US July retail sales reports (17 Aug) as well as a flurry of major 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 - 16 Aug 2022