Signs of bottoming up

KLCI: 1598.2 (8.1)
DOW: 39169.52 (50.7)
MSCI Asia: 180.57 (0.1)
FCPO (RM): 4019 (40)
BRENT (USD): 86.6 (0.19)
USDMYR: 4.7137 (-0.004)
SGDMYR: 3.4787 (-0.002)
EURMYR: 5.0708 (0.019)
AUDMYR: 3.1486 (0.009)
GBPMYR: 5.9731 (0.006)
US: 10-yr yield (%) 4.4613 (0.065)
BNM:10-yr yield (%) 3.859 (0.015)

Asia/US. Ahead of the packed key US economic readings and Powell’s speech this week, Asian markets ended mixed as investors weighed the French political chaos, fallout from a dismal US presidential debate and conflicting readings of China’s official and private PMIs. Before the 4th July holiday and key major economic prints, Dow rose 50 pts to 39,169 while Nasdaq ended at another fresh record high (+143 pts to 17,876) while the US10Y yield ticked up 7 bps to 4.46% as traders digested a poor ISM manufacturing data and stronger expectations of more inflation under the prospects of another Trump presidency. Major economic data in focus are Powell speech (2 July), JOLTS report (2 July), ISM services (3 July), FOMC minutes (4 July) and nonfarm payrolls (5 July).

Malaysia. After the 1H’s 9.3% rally, KLCI made another commendable debut in 2H (+8.1 pts to 1,598.2), led by energy and utilities stocks. Market breadth remained bullish at 1.68 vs 1.64 last Friday while daily volume shrank 15% to 3.66bn shares valued at RM2.77bn. Local institutions (+RM74m, June: +RM309m, YTD: +RM4.29bn) alongside foreigners (+RM1m, June: -RM62m, YTD: -RM827) were major net buyers while local retailers (-RM75m, June: -RM247m, YTD: -RM3.46bn) were the major net sellers. 

Outlook As technical indicators are on the mend, KLCI could stage further oversold rebound (resistance levels: 1,605-1,623-1,632) in a seasonally positive month of July (10Y/20Y: +2.7%/+2.4%), buoyed by (i) expectations of 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. On the downside, major supports are pegged at 1,575-1,580 zones. 
 

Source: Hong Leong Investment Bank Research - 2 Jul 2024