MARKET REVIEW

Asia/US. Asian markets ended lower, tracking a rout on Wall Street amid mounting concerns that Powell may skew to hawkish undertone to stamp out inflation during his speech at the Jackson Hole central bank forum on Friday. Dow lost 154 pts at 32,909 (its 4th straight fall) as sentiment was dampened by sluggish flash Aug readings (lowest since May 2020) from S&P Global US manufacturing & services PMIs and sliding July new homes sales (lowest since Jan 2016) data. Moreover, investors remain cautious ahead of the Fed’s Jackson Hole forum as traders are now pricing in a 50% probability (vs 40% 1M ago) of a 75 bps hike on 20-21 Sep FOMC meeting to tame inflation.

Malaysia: Matching an overnight slump on Wall St, KLCI fell as much as 9.8 pts before paring its losses to 4.8 pts 1,482.6 (its 5th straight decline) after some buying activity emerged for O&G and telco stocks during the final hour of trading. Market breadth (gainers/losers) improved to 0.87 from 0.33 yesterday on moderate turnover of 2.03bn shares worth RM1.55bn.

TECHNICAL OUTLOOK: KLCI

As anticipated, the bearish shooting star formation and worsening technical readings pushed KLCI from a high of 1,528 (17 Aug) to a low of 1,477 (a tad above our envisaged 1,475 support) before closing at 1,482.6 yesterday. Following the hammer pattern, we reckon that KLCI is likely to establish an interim support near 1,475, followed by 1,465 (50D MA) and 1,454 (61.8% FR) zones. Conversely, stiff hurdles are pegged at 1,500, 1,516 (downtrend line from 1,615) and 1,530 (200D MA) levels.

MARKET OUTLOOK

In tandem with persistent selloff from Wall St and bearish KLCI technicals, KLCI may continue its consolidation for a while (support: 1,454-1,465-1,475; resistance: 1,500-1,517- 1,530) as investors mull the ongoing Aug reporting season, a cautious Malaysia 4Q22 GDP outlook, timing of GE15, elevated inflation and rapid global economic slowdown. Overnight, Brent futures soared 3.8% to USD100/barrel as traders weighed the potential of OPEC+ cut after Saudi Oil Minister commented that futures prices are increasingly disconnected from fundamentals, coinciding with the return of Iran to oil markets sho uld Tehran clinch a nuclear deal with the West. HLIB maintains an Overweight rating on O&G sector with key BUY calls on DNEX, DIALOG, PCHEM, ARMADA, DAYANG and HIBISCS.

Source: Hong Leong Investment Bank Research - 24 Aug 2022