Must stage a decisive breakout above 1,634 to resume rally towards 1,646-1,660 zones

KLCI: 1633.54 (7.6)
DOW: 41198.08 (243.6)
MSCI Asia: 187.55 (0.7)
FCPO (RM): 3921 (-11)
BRENT (USD): 85.08 (1.35)
USDMYR: 4.6642 (-0.013)
SGDMYR: 3.4825 (0.002)
EURMYR: 5.1044 (0.008)
AUDMYR: 3.1498 (-0.005)
GBPMYR: 6.0834 (0.018)
US: 10-yr yield (%) 4.1576 (0)
BNM:10-yr yield (%) 3.805 (-0.019)

Asia/US. Asian markets ended mixed as investors shifted focus from high-performing mega tech stocks to economic sensitive sectors which are expected to benefit on hopes of US interest rate cuts. Meanwhile, market sentiment remained cautious as investors awaited further updates from China's 3rd Plenum (15-18 July), aimed at revitalising its sluggish economy, and assessed potential trade and geopolitical implications under a potential hawkish Trump 2.0 presidency. 

Dow notched its gains for a 6th consecutive session to a fresh record high (+244 pts to 41,198), boosted by positive housing and industrial output readings, dovish Fed official speeches coupled with upbeat earnings from JNJ and UNH. In contrast, Nasdaq sank 511 pts to 17,998 as investors accelerated their rotations away from large-cap tech stocks following news that the White House is considering tighter US restrictions on chip sales to China. Sentiment was also dented by Trump’s remark that Taiwan should be paying the US for protection and accused it of stealing America's semiconductor business. 

Malaysia. Mirroring record gains on Wall St, KLCI jumped as much as 12 pts before narrowing the gains to +7.5 pts at 1,633.5 (a fresh 3Y high). Market breadth rebounded to 1.73 vs 0.52 previously while daily volume increased 13.3% to 5.28bn shares valued at RM3.88bn. For the 13th consecutive session, foreigners were the major net buyers (+RM236m, July: +RM1.49bn, YTD: +RM670m) while local retailers (-RM165m, July: -RM823m, YTD: -RM4.21bn) and local institutions (-RM70m, July: -RM675m, YTD: +RM3.54bn) emerged as major net sellers. 

Outlook In wake of the Fed’s rate-cut pivot, the return of foreign investors (July: +RM1.49bn, YTD: +RM670m), coupled with exuberance in investment themes, KLCI is poised to stage a breakout above immediate barrier at 1,634 (support: 1,608-1,620), before revisiting higher resistances towards at 1,646-1,660 zones.

Source: Hong Leong Investment Bank Research - 18 Jul 2024