Drifting sideways before advancing towards 1,646-1,660 zones

KLCI: 1633.81 (0.3)
DOW: 40665.02 (-533.1)
MSCI Asia: 185.81 (-1.7)
FCPO (RM): 3929 (-8)
BRENT (USD): 85.11 (0.03)
USDMYR: 4.6695 (0.005)
SGDMYR: 3.4823 (0)
EURMYR: 5.1045 (0)
AUDMYR: 3.1446 (-0.005)
GBPMYR: 6.0655 (-0.018)
US: 10-yr yield (%) 4.2021 (0.044)
BNM:10-yr yield (%) 3.805 (0)

Asia/US. Asian markets ended lower, led by tech sector’s rout following a 2.8% slide on Nasdaq. Sentiment was negative amid news that the US was considering tighter curbs on chip exports to China, while Trump’s comments that Taiwan should pay the US for defence added to geopolitical risks over the sector. As the 2Q24 earnings season gathered steam, the Dow tumbled 533 pts to 40,665 after rallying 1,906 pts six days in a row, as investors continued to pare positions on high-flying tech stocks. Meanwhile, the rotation runs on economic sensitive and laggard names also witnessed broad-based selloff as signs of economic weakness overwhelmed optimism over rate cuts. On corporate front, NFLX fell 0.7% as the group added more subscribers than forecast but gave a cautious sales outlook. DPZ plunged 13% as earnings missed forecasts while suspended its long-term guidance of 1,100 annual net store openings.

Malaysia. In line with the regional markets, KLCI ended flat (+0.3-pt to 1,633.8). Market breadth reversed at 0.69 vs 1.73 previously while daily volume rose 3.8% at 5.48bn shares valued at RM4.22bn (+8.8% D-D). For the 14th consecutive session, foreigners were the major net buyers (+RM21m, July: +RM1.52bn, YTD: +RM691m) alongside local retailers (+RM34m, July: -RM790m, YTD: -RM4.17bn) while local institutions (-RM55m, July: -RM729m, YTD: +RM3.48bn) emerged as major net sellers for the six consecutive session.

Outlook After surging 179 pts/12.3% YTD and 43 pts/2.7% MTD, KLCI may encounter mild resistance near 1,634 (3Y fresh record high) as investors await more clarity on the Fed's rate-cut trajectory, US ongoing 2Q24 results season and China’s medium to long term policy frameworks to boost its slowing economy after the conclusion of 4-day 3rd Plenum. However, downside risks are expected to be cushioned by Malaysia’s stable corporate earnings and economic growth, (ii) planned investments inflow, (iii) government reforms, (iv) exuberance in investment themes, (v) the return of foreign investors. Short term supports are pegged at 1,609-1,622 while resistances are situated at 1,646-1,660 zones.

Source: Hong Leong Investment Bank Research - 19 Jul 2024