Market turns edgy ahead of the Aug results season and Wall Street’s volatility

KLCI: 1622.07 (-14.5)
DOW: 40415.44 (127.9)
MSCI Asia: 183.33 (-2.5)
FCPO (RM): 3990 (5)
BRENT (USD): 82.29 (-0.34)
USDMYR: 4.682 (-0.004)
SGDMYR: 3.482 (-0.003)
EURMYR: 5.0997 (0.001)
AUDMYR: 3.1206 (-0.014)
GBPMYR: 6.054 (0.006)
US: 10-yr yield (%) 4.2525 (0.014)
BNM:10-yr yield (%) 3.809 (-0.009)

Asia/US. Asian markets were in a sea of red as investors weighed topics ranging across geopolitics, de-dollarisation and rates, as well as the implications on the global and Asian economies following an increased odds of Trump 2.0 presidency and Biden’s decision to quit re-election and backed Kamala Harris candidature. Sentiment was also dampened by China’s surprised rates cut after President Xi’s policy blueprint underwhelmed investors post the 3rd plenary session. 

Dow gained 128 pts to 40,415, driven by a relief rally in mega cap tech shares after recent routs as investors looked beyond Biden’s ending his re-election campaign and political chaos to focus on the ongoing 2Q24 results season and the Fed’s rate-cut optimism. Overall, the S&P 500 earnings is expected to grow 9.7% YoY, marking the highest earnings growth rate 4Q21. This week, the 2Q results season will kick into high gear with reports from GOOGL, TXN, V, TSLA, IBM, KO, HON, DOW, 3M, while major economic data releases are advance 2Q GDP growth rate, PCE inflation, S&P global manufacturing and services PMI. 

Malaysia. In line with sluggish Wall St and regional markets, KLCI tumbled as much as 19.8 pts before narrowing the losses to 14.5 pts to 1,622.1, led by selloff on YTL, PBBANK, AXIATA, MAXIS, PMETAL, and MISC. Market breadth stayed bearish at 0.27 vs 0.60 last Friday while daily volume jumped 21% to 5.34bn shares valued at RM3.42bn amid mounting selling pressures. Foreigners emerged as net sellers after net buying RM1.74bn for the past 15th straight session (-RM147m, July: +RM1.46bn, YTD: +RM537m) while local retailers (+RM88m, July:-RM693m, YTD: -RM4.08bn) and local institutions (+RM69m, July: -RM772m, YTD: +RM3.44bn) were the major net buyers. 

Outlook Unless the 1,610-1,625 support levels are breached, KLCI’s rebound from 1,446 (YTD low) may continue (resistance: 1,646-1,660) despite anticipating a healthy profit-taking consolidation ahead of the August reporting season. However, downside risks would be cushioned by (i) Fed’s rate-cut optimism, (ii) stable corporate earnings and economic growth, (iii) planned investments inflow, (iii) government reforms, (iv) exuberance in investment themes, and (v) renewed buying interests from foreign investors. 

VIRTUAL PORTFOLIO We closed our position on KGW (9.4% loss) after hitting the cut loss level.

Source: Hong Leong Investment Bank Research - 23 Jul 2024