MARKET REVIEW

Asia/US. Ahead of the crucial speech by Powell at the Jackson Hole symposium tomorrow, MSCI All Countries Asia Pacific index slid 0.54% to 157.87 (5th straight decline) following hawkish remarks by Kashkari that if inflation turns out to be much more embedded than markets appreciate, the central bank would have to be more aggressive for longer. Moreover, latest ugly economic indicators from the US, China and Euro further hammered fragile sentiment. After sliding 1,091 pts in the last 3 days, Dow jumped as much as 186 pts before paring the gains to 60 pts at 32,969. Powell’s speech during the Jackson Hole on Friday will be in the spotlight, with investors bracing for more hawkish remarks that would reiterate the need for additional rate hikes to fight inflation despite weakening economic data. Meanwhile, US 10Y Treasury yield soared 6 bps to 3.1% (+59 bps since recent bottom on 2 Aug), signalling further monetary policy tightening ahead.

Malaysia: Mirroring regional markets fall, KLCI skidded 15.3 pts to 1,467.3 (its 6th straight decline) amid renewed selloff by foreigners, led by losses in plantation, utilities and telcos stocks. Market breadth (gainers/losers) eased to 0.71 from 0.87 previously on higher turnover of 2.89bn shares worth RM1.74bn.

TECHNICAL OUTLOOK: KLCI

As anticipated, the bearish shooting star formation and worsening technical readings triggered a selldown in KLCI from a high of 1,528 (17 Aug) to 1,467 yesterday (a tad below our envisaged 1,475 support). Unless swiftly reclaiming above the 1,475 (support-turned resistance now) levels, KLCI may fall further following the multiple supports breakdown, with major supports situated at 1,454 (61.8% FR), 1,436 (76.4% FR) and 1,408 zones. We may witness mild technical rebound when index hits 1,436-1,454 levels. On the upside, stiff hurdles are pegged at 1,475, 1,500 and 1,515 (downtrend line from 1,615) levels.

MARKET OUTLOOK

Ahead of the Powell’s speech at the Jackson Hole forum and deteriorating global economic indicators, KLCI may continue its consolidation mode for a while (support: 1,408-1,436- 1,454; resistance: 1,475-1,500-1,516) as investors mull the peak of the Aug reporting season, a cautious Malaysia 4Q22 and 2023 GDP outlook, as well as the speculation of GE15 timing.

Source: Hong Leong Investment Bank Research - 25 Aug 2022