Short term hurdles at 1,632-1,660 levels

KLCI: 1619.06 (-4.1)
DOW: 40000.9 (247.2)
MSCI Asia: 187.97 (-0.5)
FCPO (RM): 3915 (-20)
BRENT (USD): 85.03 (-0.37)
USDMYR: 4.6715 (-0.016)
SGDMYR: 3.4781 (-0.001)
EURMYR: 5.0852 (0.001)
AUDMYR: 3.165 (-0.003)
GBPMYR: 6.0494 (0.014)
US: 10-yr yield (%) 4.1829 (-0.027)
BNM:10-yr yield (%) 3.84 (-0.011)

Asia/US. Asian markets ended mixed, taking cues from a 2.45% slump on Nikkei 225 and strengthening yen for a 2nd day (vs USD), as investors shifted away from export-focused mega caps, following weaker-than-expected US inflation data that reinforced expectations of a Fed rate cut. Cautious sentiment prevailed as markets awaited the key China's GDP release and its 3rd Plenum, which could provide insights into efforts to revive its slowing economy. 

Dow surged as much as 504 pts to an all-time high at 40,257, fuelled by increasing expectations of a Sep rate cut. However, it pared the robust gains to end +247 pts at 40,001 amid disappointing banks results and higher-than-expected PPI data. This week, the 2Q results season will kick into high gear with reports from GS, BLK, UNH, BAC, MS, J&J, Netflix and Amex, while major economic data releases are retail sales, industrial production, housing starts and Powell’s speech. Meanwhile, the attempted assassination of Trump could boost his chances of re-election, sparking market volatility. Under a Trump 2.0 presidency, his administration may promise a more hawkish trade policy, reduced regulations, looser climate change measures, and possible extensions of tax cuts, potentially leading to higher deficits and inflation, and prompting prolonged Fed tightening.

Malaysia. Tracking the mixed regional markets, KLCI lost 4 pts to 1,619.1 (+8.1 pts WoW), snapping its 3-day gain. Market breadth was 0.83 vs 1.59 previously while daily volume reduced 15% to 4.58bn shares valued at RM3.73bn. For the 10th straight day, foreigners were the major net buyers (+RM1m, July: +RM872m, YTD: +RM44m) alongside local retailers (+RM40m, July: -RM587m, YTD: -RM3.97bn) while local institutions (-RM41m, July: -RM285m, YTD: +RM3.93bn) emerged as major net sellers. 

Outlook Given the Sep’s US rate-cut optimism, the return of foreign investors (due to policy reforms, rising FDIs and infrastructure build-up), coupled with exuberance in investment themes, KLCI is poised to revisit its short-term barrier near the 3Y high of 1,632 (support: 1,600-1,605). Higher resistances are pegged at 1,660-1,676 zones.
 

Source: Hong Leong Investment Bank Research - 15 Jul 2024