Anticipate resistance at 1,623-1,632 zones

KLCI: 1611.02 (-5.7)
DOW: 39344.79 (-31.1)
MSCI Asia: 184.07 (-0.4)
FCPO (RM): 4042 (-25)
BRENT (USD): 85.75 (-0.79)
USDMYR: 4.7087 (0)
SGDMYR: 3.4896 (0.005)
EURMYR: 5.0982 (0.013)
AUDMYR: 3.172 (0)
GBPMYR: 6.0218 (0.018)
US: 10-yr yield (%) 4.2783 (0)
BNM:10-yr yield (%) 3.867 (0.003)

Asia/US. Despite rising Fed’s rate cut wagers following cooling US labour market data (5 July), Asia-Pacific markets ended mixed as investors awaited Powell’s testimony (9 July), China (10 July) and US (11 July) CPI prints to assess the world 1st and 2nd largest economic growths and monetary policy paths. Sentiment was also dampened by the prospects of hung-parliament in France after the July 8 elections. Dow shed 31 pts to 39,345 while Nasdaq (+49 pts to 20,438) and S&P 500 (+5.7 pts to 5,572) ended at another fresh record highs after the US 1-year inflation expectations fell to 3% (eased for a 2nd straight month in July), ahead of the Powell’s testimony and the start of the earnings season this week.

Malaysia. Ahead of the key US jobs data (5 July) and extended Awal Muharram holiday (8 July), KLCI fell 5.7 pts to 1,611 (+20.9 pts WoW) on profit taking. Market breadth reversed to negative at 0.67 after staying positive for the 5th consecutive session while daily volume slid 12% to 4.34bn shares valued at RM2.95bn. For the 6th straight day, foreigners (+RM11.1m, July: +RM394m, YTD: -RM434) emerged as major net buyers alongside with local retailers (+RM0.4m, July: -RM427m, YTD: -RM3.81bn) while local institutions (-RM11.4m, July: +RM33m, YTD: +RM4.25bn) were the major net sellers. 

Outlook After rallying 21 pts WoW and +156 pts YTD, KLCI could face some resistance near 1,623-1,632 zones as investors await Powell’s testimony, China and US CPI prints, the start of US results season coupled with concern of possible parliamentary by-elections should speaker Johari announce the vacancy of six Bersatu’s MP seats. Nevertheless, downisde risk is likley to be cushioned by (i) expectations of resilient corporate earnings and economic growth; (ii) influx of planned investments; (iii) government’s reforms, 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. 

Source: Hong Leong Investment Bank Research - 9 Jul 2024