To retest 1,623-1,632 zones amid bullish technicals and strong foreign net inflows

KLCI: 1615.32 (17.4)
DOW: 39308 (-23.8)
MSCI Asia: 182.51 (1.7)
FCPO (RM): 4097 (15)
BRENT (USD): 87.34 (1.1)
USDMYR: 4.7195 (-0.002)
SGDMYR: 3.4793 (0.005)
EURMYR: 5.0758 (0.019)
AUDMYR: 3.1493 (0.01)
GBPMYR: 5.9921 (0.027)
US: 10-yr yield (%) 4.3587 (-0.073)
BNM:10-yr yield (%) 3.864 (-0.003)

Asia/US. Asian markets ended mostly higher, taking cues from Powell’s disinflationary path remark and record highs on S&P 500 and Nasdaq, overshadowing the sluggish services PMIs in China (slipped to 8M low) and Japan (first contraction since Aug 22). Ahead of the 4th July holiday and major nonfarm payrolls data (5 July), Dow eased 24 pts to 39,308 while Nasdaq (+159 pts at 18,188) and S&P 500 (+28pts to 5,537) ended at fresh record highs, as the US10Y bond yield fell (-7 bps to 4.36%) after a raft of poor economic prints (i.e. ADP, weekly jobless claims, ISM services) reinforced the case for the Fed to start cutting rates in 2H24. 

Malaysia. Mirroring the positive leads from Wall St and regional markets coupled with a strong foreign buying, KLCI surged 17.4 pts to 1,615.3, supported by buying interests in YTL, YTLPOWR, MISC, CIMB, TENAGA and CDB. Market breadth remained positive for the 4th consecutive day at 2.77 vs 1.56 previously while daily volume soared 47% to 5.39bn shares valued at RM4bn. For the 4th consecutive day, foreigners (+RM259m, July: +RM297m, YTD: -RM531) emerged as major net buyers while local retailers (-RM200m, July: -RM363m, YTD: -RM3.75bn) alongside local institutions (-RM59m, July: +RM66m, YTD: +RM4.28bn) were the major net sellers. 

Outlook In wake of the bullish downtrend channel brekaout, KLCI could stage further oversold rebound (resistance levels: 1,623-1,632-1,650) 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 1,588-1,600-1,605 range. 
 

Source: Hong Leong Investment Bank Research - 4 Jul 2024