Range bound pattern ahead of the upcoming Aug results season

KLCI: 1612.88 (-2.3)
DOW: 40589.34 (654.3)
MSCI Asia: 178.78 (-0.3)
FCPO (RM): 3942 (24)
BRENT (USD): 81.13 (-1.24)
USDMYR: 4.6578 (-0.003)
SGDMYR: 3.4662 (-0.006)
EURMYR: 5.0555 (-0.003)
AUDMYR: 3.0544 (0.013)
GBPMYR: 5.9939 (-0.012)
US: 10-yr yield (%) 4.1939 (-0.047)
BNM:10-yr yield (%) 3.784 (0.004)

Asia/US. Asian markets initially rose following a strong rebound in the DJIA and positive US 2Q GDP data, along with optimism about potential rate cuts. However, most markets ended the day mixed as traders awaited key events – i.e. US June PCE price data (28 July) and the BOJ's policy decision (31 July). Dow rallied 654 pts to 40,589 (+0.7% WoW), propelled by the rotation into economically sensitive shares after June PCE price data (met expectation) bolstered speculation of a Fed cut rate as early as Sep. On earnings front, MMM ballooned 23% after Dow’s components and industrial conglomerate raised earnings outlook. This week, earnings reports from Dow components and major tech giants i.e. MCD, MSFT, AMD, QCOM, META, AAPL, and AMZN are in focus. Additionally, key economic data releases include the FOMC decision on 31 July, jobs report, consumer confidence data, and ISM manufacturing index.

Malaysia. Mirroring the slide in regional markets, KLCI fell 6 pts to 1,615.2, dragged by selloff on TENAGA, YTLPOWR, AXIATA, KLK, SIME and GENTING. Market breadth was bearish at 0.27 vs 0.44 previously with 4.55bn shares transacted valued at RM3.11bn. On fund flows, local institutions (+RM267m, July: -RM591m, YTD: +RM3.62bn) and local retailers (+RM103m, July: -RM618m, YTD: -RM4.0bn) were the major net buyers whilst foreigners (-RM370m, July: RM1.21bn, YTD: +RM381m) emerged as major net sellers.

Outlook In the short term, KLCI may continue its consolidation as investors await the FOMC and BOJ policy outlooks, ongoing US corporate earnings and upcoming Bursa’s Aug results season. Barring a breakdown below the 1,600-1,611 support levels, KLCI may continue its upward trajectory towards 1,646-1,660 after a healthy profit-taking consolidation, underpinned by: (i) Fed’s rate-cut pivot, (ii) stable corporate earnings and economic growth in Malaysia, (iii) planned investments inflow, (iii) government reforms, and (iv) exuberance in investment themes. 

Source: Hong Leong Investment Bank Research - 29 Jul 2024