MARKET REVIEW

Asia/US. In sync with an overnight Wall St rally, Asian markets jumped in early trades amid a pullback in the dollar and Treasury yields coupled with lower oil prices. However, the gains were tapered off towards the end as China announced that megacity Chengdu is extending their lockdown due to COVID-19, adding to economic woes. Dow ended +193 pts at 31,775 in a roller-coaster ride as investors digested Powell’s latest remarks that the Fed will fight inflation “until the job is done,” heightening expectations of another 75 bps hike on 22 Sep FOMC meeting. Elsewhere, In Europe, the ECB delivered a record 75 bps rate hike to 1.25%, with Lagarde providing a similar view regarding the need to tame price growth while pointing to a darkening growth outlook for the Eurozone.

Malaysia. Taking cues from higher Wall St and a resumption of buying interests from local institution (6th day of net buying by local institutions), coupled with expectation for BNM to pause in the 2-3 Nov meeting after a 25 bps OPR hike to 2.5% yesterday (betting that inflation to peak in 3Q22 before moderating), KLCI rose 3.4 pts to record its 2nd straight gain. Market breadth (gainers/losers) rebounded 1.12 from 0.73 previously, supported by 15% jump in daily trading value to RM1.86bn

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 1,527 (200D MA) successfully. Meanwhile, major supports are pegged at 1,455-1,475-1,487 zones.

MARKET OUTLOOK

In line with a back-to-back Wall St rally, 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 1,527 (200D MA) successfully, as investors continue to assess the 2H22 corporate earnings and GDP outlook (stymied by 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. Meanwhile, sectorial winners from yesterday’s 25 bps OPR hike are banks while losers are REITs and property. Sectors that ride on USD strength which we are positive on include Technology, O&G upstream E&P, and Wood-based/Furniture players.

Source: Hong Leong Investment Bank Research - 9 Sept 2022