Stormy days ahead amid economic, earnings and geopolitical headwinds

KLCI: 1611.05 (-13.2)
DOW: 39737.26 (-610.7)
MSCI Asia: 176.81 (-5.5)
FCPO (RM): 3917 (47)
BRENT (USD): 76.81 (-2.71)
USDMYR: 4.497 (-0.072)
SGDMYR: 3.3772 (-0.037)
EURMYR: 4.866 (-0.059)
AUDMYR: 2.9271 (-0.054)
GBPMYR: 5.7285 (-0.1)
US: 10-yr yield (%) 3.7904 (-0.186)
BNM:10-yr yield (%) 3.72 (-0.008)

Asia/US. Tracking US markets’ slide, Asian markets were in a sea of red due to escalating fears about global economic growth following disappointing data from major economies like the US, Europe, and China coupled with heightened geopolitical tensions in Middle East (after the assassination of a top Hamas leader). Additionally, profit disappointments from the tech behemoth i.e. Amazon and Intel further dampened sentiment, overshadowing Fed’s rate-cut optimism in Sep. Dow plummeted as much as 990 pts before paring the losses to 611 pts at 39,737 while the US10Y bond yield plunged 19 bps to 3.79%, as the weak jobs report, sluggish earnings and outlook guidance by tech giants, triggered fears that the US economy could be heading for recession. Key economic data on tap this week is the ISM Services PMI and earnings results from Amgen, Caterpillar, Uber, Walt Disney and Eli Lilly.  

Malaysia. Tracking the regional markets’ slump, KLCI plunged 13.2 pts to 1,611.1, with the market breadth deteriorating to its worst in two years at 0.11. Daily volume surged 47.3% to 5.17bn share valued at RM3.98bn as selling spree intensified. On fund flows, local institutions (-RM200m, YTD: +RM3.28bn) were the primary net sellers while foreigners (+RM101m, YTD: RM603m) and local retailers (+RM99m, YTD: -RM3.88bn) emerged as the key net buyers. 

Outlook As investors weigh earnings uncertainty for the upcoming Bursa Aug results season, heightened geopolitical tensions in the Middle East and concern of a rapidly slowing US economy, KLCI may extend its consolidation in the short term, align with a seasonally weak month of Aug (average KLCI growth for 10Y/20Y: -1.1%/-1.4%). Major supports are pegged at 1,588-1,600-1,606 while resistance areas are situated near 1,622-1,638-1,650.

VIRTUAL PORTFOLIO Last Friday, we closed our positions on FEYTECH (1.5% loss) and FOCUSP (1.8% loss) amid weakening technicals.

Source: Hong Leong Investment Bank Research - 5 Aug 2024