MARKET REVIEW

Asia/US. Despite more stimulus measures expected from the China government to support its ailing economy, MSCI All Countries Asia Pacific Index tumbled 1.34% to 150.55. Sentiment was cautious following a disappointing Aug trade data from China, a strong US services sector report reinforced expectations for a hawkish Fed to tame inflation, and ECB may continue to frontload a series of rate hikes and sacrifice growth in the region to tame skyrocketing inflation in its policy meeting today. Dow staged a 1.4% relief rally to 31,581 (still down 7.9% from 1M peak of 34,281) after a decline in Treasury yields and plunging oil prices coupled with a weakening US economic outlook indicated by the Fed’s Biege Book, easing fears about inflation and interest rates. Elsewhere, Fed Vice Chair Brainard warned about the risk of interest rates going too high although she also reassured markets that the central bank would continue fighting inflation for as long as needed.

Malaysia. After falling 23.8 pts in the last four sessions, KLCI staged a 3.1-pt technical rebound at 1,491.4, buoyed by selected buying interests on PCHEM, PMETAL, TENAGA, IHH, MAYBANK and PETDAG. However, market breadth (gainers/losers) slipped to 0.73 from 1.35 a day ago as sentiment remained edgy ahead of the key BNM meeting today and tumbling USDMYR to a 2Y low at 4.50.

TECHNICAL OUTLOOK: KLCI

We reiterate our view that KLCI could extend its range bound consolidation mode unless breaking key hurdles at 1,505 (downtrend line) and 1,528 (200D MA) successfully. Meanwhile, major supports are pegged at 1,455-1,475-1,483 zones.

MARKET OUTLOOK

In line with a much-awaited relief rally from Wall St overnight, KLCI may retest the critical 1,500 psychological resistance today. However, we still reiterate our view that KLCI could extend its range bound consolidation mode for a while unless the index can break key hurdles at 1,505 (downtrend line) and 1,528 (200D MA) successfully, as investors continue to assess the 2H22 corporate earnings outlook (stymied by elevated inflation, rising interest rates, weakening RM, government’s economic rationalization measures, global economic slowdown etc.), BNM policy meeting decision today, general election fluidity, as well as escalating US-China tensions.

Source: Hong Leong Investment Bank Research - 8 Sept 2022