MARKET REVIEW

Asia/US. Ahead of the key speech by Powell at the Jackson Hole symposium tonight, MSCI All Countries Asia Pacific index rose 1.5% to 160.24 after sliding 3.1% in the last five sessions, as sentiment was boosted by China’s 1 trillion yuan worth of stimulus measures to kick-start its economy from Covid-related disruptions, property sector woes and power shortage. Lifted by a rally in technology stocks and a smaller contraction of a revised US 2Q22 GDP of 0.6% (vs -0.9% earlier), Dow soared 322 pts to 33,292 and US 10Y bond yield fell 8 bps to 3.03%, as investors were unfazed by hawkish drumbeat from Fed officials before Powell’s speech tonight.

Malaysia: Following a 6-day losing streak of 51.5 pts and a resumption of strong foreign net buying, KLCI surged 28.2 pts to 1,495.5, in sync with higher regional markets as China stepped up its economic stimulus with a further 1 trillion yuan of funding largely focused on infrastructure spending. Market breadth (gainers/losers) jumped to 2.26 (the highest since 2.42 on 11 Aug) vs 0.71 previously, with all 13 sub-indices closing in the positive territory.

TECHNICAL OUTLOOK: KLCI

Tracking higher regional markets, KLCI staged a 28.2-pt relief rally to 1,495.5 after plunging 51.5 pts in six days. In wake of a swift reclaim above the major 1,475 (support-turned resistance now) hurdle and a strong back-to-back gain from Dow overnight, KLCI may retest 1,500 to 1,516 (downtrend line from 1,615) levels, with more formidable resistance at 1,529 (200D MA). Key supports are pegged at 1,465-1,475-1,487 zones.

MARKET OUTLOOK

On the back of China stimulus-led rally and overnight bullish wrap-up from Wall St, KLCI is expected to retest overhead 1,500-1,516 hurdles today, ahead of the wide-watched Powell’s speech. Over the mid-term, however, underlying sentiment could stay cautious as expectations of a slower 2H22 Malaysia GDP growth (amid elevated inflation, rising interest rates and global economic slowdown, etc), GE15 risk, as well as escalating US-China tensions may continue to dampen sentiment, capping upside near 1,530-1,540 territory.

Source: Hong Leong Investment Bank Research - 26 Aug 2022