MARKET REVIEW

Asia/US. In line with Wall Street's sluggish session last Friday and US Labour Day holiday (5 Sep), Asian markets ended mixed. Sentiment was dampened by lingering fears about further monetary tightening despite rising US unemployment rate and moderating wages growth, coupled with extended Covid-19 lockdowns in major Chinese cities that could derail its economic recovery. Dow skidded 3% WoW to 31,318 as investors weighed a parade of hawkish chorus from Fed officials and economic crisis in the EU amid the closure of energy supplies from Russia. Following last Friday’s US Aug jobs report, traders are pricing in a 75bps rate hike during the 21 Sep FOMC meeting (60% vs 75% a week ago).

Malaysia. Tracking tepid regional markets, KLCI eased 1.4 pts at 1,489.8 as investors preferred sideline due to the absence of fresh catalysts after oscillating tightly between 1,486.8 and 1,494.8 levels. Market breadth (gainers/losers) improved to 0.74 from 0.67 last Friday while daily volume and value traded fell 4% and 22% to 2.08bn shares valued at RM1.25bn, respectively.

TECHNICAL OUTLOOK: KLCI

We reiterate our view that KLCI could extend its range bound consolidation mode unless breaking key downtrend line resistance near 1,510 and 1,528 (200D MA) successfully. Meanwhile, major supports are pegged at 1,455-1,475-1,483 zones.

MARKET OUTLOOK

Tracking the seasonally weak performance in Sep (avg 10Y/20Y: -1%/-0.9%) and persistent Wall St selloff, KLCI is expected to maintain its range bound consolidation mode (support: 1,455-1,475; resistance: 1,510-1,528) as investors assess the conclusion of 2Q22 results, upcoming 8 Sep BNM monetary statement (amid elevated inflation, rising interest rates, weakening RM, government’s economic rationalization measures, global economic slowdown etc.), general election fluidity, as well as escalating US -China tensions. Brent futures surged 2.9% to USD95.7/barrel following OPEC+ decision to reduce output by 100k bpd (0.1% of global demand) in the wake of macroeconomic headwinds and counter a potential supply boost from Iran. HLIB maintains an Overweight rating on O&G sector with key BUYs on DNEX (TP RM1.74), ARMADA (TP RM0.76), DAYANG (TP RM1.19) and HIBISCS (TP RM1.63). 

Source: Hong Leong Investment Bank Research - 6 Sept 2022