Upside bias to retest 1,623-1632 region

KLCI: 1618.38 (4)
DOW: 39721.36 (429.4)
MSCI Asia: 185.19 (0.2)
FCPO (RM): 3914 (-4)
BRENT (USD): 85.08 (0.42)
USDMYR: 4.6997 (-0.007)
SGDMYR: 3.483 (-0.003)
EURMYR: 5.0844 (-0.01)
AUDMYR: 3.1674 (-0.005)
GBPMYR: 6.0199 (-0.009)
US: 10-yr yield (%) 4.2841 (-0.012)
BNM:10-yr yield (%) 3.845 (0)

Asia/US. Ahead of the US CPI print (11 July) and the start of the 2Q24 earnings season effective 11 Jul (DAL, PEP, C, JPM and WFC), Asian bourses treaded water as markets digested varied inflation prints from China (lower YoY) and Japan (higher YoY). Sentiment remained mixed on the Fed's potential timeline for tapering rates following Powell's remarks that the US economy is on a disinflationary trajectory and no longer overheated. Dow surged 429 pts to 39,721 while Nasdaq (+216 pts to 18,646) and S&P 500 (+57 pts to 5,634) extended their record highs amid rallies in mega tech stocks following Powell’s testimonies (9 & 10 July) had fuelled investor hopes for a rate cut as early as Sep. In his 2nd day of Congressional testimony, Powell commented that the US is still heading towards soft landing and noted some progress on inflation while the labour market is "not a source of broad inflationary pressures for the economy now”. 

Malaysia. KLCI rose for a 2nd day (+4 pts to 1,618.4), as investors weighed news that the definitive agreement with Singapore for the JS-SEZ can be signed by Sep 2024 and Johari’s decision of no vacancies for the six Bersatu MPs despite backing PM. Market breadth was positive at 1.04 vs 0.79 previously while daily volume inched up 2.1% to 4.76bn shares valued at RM3.71bn. For the 8th straight day, foreigners (+RM42m, July: +RM482m, YTD: -RM346) recorded net inflows alongside with local institutions (+RM9m, July: +RM66m, YTD: +RM4.28bn) while local retailers (-RM51m, July: -RM548m, YTD: -RM3.93bn) emerged as major net sellers for the 7th consecutive day. 

Outlook Taking cues from the dovish-tilted Powell’s testimonies and positive newsflow from the JS-SEZ coupled with exuberance in investment themes surrounding tourism recovery, energy transition, Johor’s reinvigoration, disposable income boosters, and trade diversion/China+1 strategy, KLCI may revisit the immediate 1,623-1,632 zones after consolidating above the 1,603 (downtrend resistance-turned support) levels. 
 

Source: Hong Leong Investment Bank Research - 11 Jul 2024