MARKET REVIEW

Asia/US. MSCI All Countries Asia Pacific Index slid 0.82% to 160.77 (-1.4% WoW), as investors fretted about hotter-than-expected July CPI in Japan and China, mounting worries over the path of Chinese economic recovery due to virus outbreaks, a property slump, and the latest energy crunch. Dow plunged 292 pts to 33,706 and US 10Y bond yield soared 0.09% to 2.97%, as investors paused their bullish bets on stocks amid fears that Powell could push back against the idea of a dovish pivot at his Jackson Hole speech on 26 Aug. Sentiment was also pressured by hawkish remarks by James Bullard that he is leaning towards a 3rd consecutive 75bps rate hike in Sep as there are no guarantees that inflation has peaked, along with the latest July FOMC minutes showing the Fed will continue to raise rates until inflation substantially cools.

Malaysia: Tracking weaker regional markets, KLCI slid 12.2 pts at 1,504.4, recording its 3rd straight decline led by selldown in selected heavyweights eg AXIATA, IHH, MAXIS, PBBANK, SIMEPLT and DIGI. Market breadth (gainers/losers) rose to 0.93 from 0.75 a day ago, but daily volume and value eased by 16% and 21% to 2.11bn shares valued at RM1.53bn.

TECHNICAL OUTLOOK: KLCI

Tracking the shooting star formation, we reckon that further healthy pullback is on the cards after rallying from 1,408. Major downside supports are pegged at 1,497 (20D MA), 1,483 (3 Aug low) followed by 1,475 levels. On the flip side, stiff hurdles are situated at 1,530 (200D MA) and 1,555 (100W MA) levels.

MARKET OUTLOOK

KLCI eased 1.8 pts WoW to 1,504.4 after rallying from a low of 1,408 to a high of 1,527. The benchmark may continue its profit taking consolidation (weekly support: 1,475-1,483; resistance: 1,512-1,530) amid the shooting stars pattern and weakening indicators as investors mull the ongoing Aug reporting season, a cautious Malaysia 4Q22 GDP outlook, speculation of GE15 in 4Q22, elevated inflation and a rapid global economic slowdown.

Meanwhile, Dow fell 55 pts WoW after rallying 15.6% from 29,654 (52-week) to a peak of 34,281 (16 Aug) before falling 1.68% at 33,706. In the near term, the index could trend lower, reflected by the potential shooting star pattern (weekly chart) whilst Powell’s speech on Friday should garner attention as recent economic reports have sparked a divergence in rate hike expectations. Key reports this week are July personal spending, personal income as well as the core PCE deflator (the Fed’s preferred proxy for inflation) on Friday.

Source: Hong Leong Investment Bank Research - 22 Aug 2022