Potential rebound to 1,605-1,632 range in a seasonally positive month of July

KLCI: 1590.09 (5.1)
DOW: 39118.86 (-45.2)
MSCI Asia: 180.51 (0.7)
FCPO (RM): 3916 (26)
BRENT (USD): 85.08 (-1.33)
USDMYR: 4.7175 (0)
SGDMYR: 3.4806 (0.003)
EURMYR: 5.052 (0.006)
AUDMYR: 3.1393 (-0.007)
GBPMYR: 5.9672 (0.001)
US: 10-yr yield (%) 4.3961 (0.11)
BNM:10-yr yield (%) 3.844 (-0.03)

Asia/US. Before the Fed’s PCE data on 28 June and China’s official June manufacturing and services PMIs (30 June), Asian markets ended mildly higher on hopes that the Fed will cut interest rates in 2H24 following a raft of soft economic readings last week. The Dow initially soared 279 pts but ended -45 pts at 39,119 as investors digested easing core PCE data and a disappointing Biden-Trump debate. On corporate front, NKE slid 20% amid a gloomy forecast. This week, investors' focus will be on ISM manufacturing & services data, JOLTS & nonfarm payrolls report and FOMC minutes.

Malaysia. Benefitting from mild 1H24 window dressing activities, KLCI gained 5.2 pts at 1,590.1 (June: -0.4%; 2Q: +3.5%). Market breadth surged to 1.64 vs 0.40 a day ago while daily volume picked up 1.7% to 4.3bn shares valued at RM3.1bn. Foreigners emerged as major net buyers (+RM130m, June: -RM62m, YTD: -RM828) while local institutions (-RM29m, June: +RM309m, YTD: +RM4.21bn) alongside local retailers (-RM101m, June: -RM247m, YTD: -RM3.39bn) were the major net sellers. 

Outlook Given KLCI’s 1H strong outing (+135 pts/9.3%) and ongoing foreign selling (-RM828m YTD), further consolidation (support: 1,562-1,575-1,580) is likely as investors continue to weigh the impact of diesel subsidy rationalisation plan, Fed’s 2H rate-cut trajectory, coupled with rising political heat should speaker Johari announce (within the next three weeks) the vacancy of six Bersatu MP seats and by-elections. However, an oversold rebound remains possible (resistance levels: 1,605-1,632) in a seasonally positive month of July (10Y/20Y: +2.7%/+2.4%), buoyed by (i) resilient corporate earnings and economic growth; (ii) influx of planned investments; (iii) government’s reforms aimed at long-term economic and fiscal improvements, and (iv) exuberance in investment themes surrounding tourism recovery, energy transition, Johor’s reinvigoration, disposable income boosters (following the introduction of the EPF Account 3 and pay rise for civil servants), and trade diversion/China+1 strategy.

VIRTUAL PORTFOLIO We closed ARMADA (0% return) last Friday due to expiry.
 

Source: Hong Leong Investment Bank Research - 1 Jul 2024