Market turbulence persists amid global markets’ rout and ongoing results season

KLCI: 1536.48 (-74.6)
DOW: 38703.27 (-1034)
MSCI Asia: 166.07 (-10.7)
FCPO (RM): 3789 (2)
BRENT (USD): 76.3 (-0.51)
USDMYR: 4.4272 (-0.07)
SGDMYR: 3.3516 (-0.026)
EURMYR: 4.8485 (-0.018)
AUDMYR: 2.8558 (-0.071)
GBPMYR: 5.6423 (-0.086)
US: 10-yr yield (%) 3.7884 (-0.002)
BNM:10-yr yield (%) 3.72 (-0.008)

Asia/US. Tracking a 12.4% slide (its worst drop since Black Monday in 1987) on NIKKEI 225 after the BOJ hiked interest rates and struck an unexpectedly hawkish chord, Asian markets ended in a bearish tone jolted by a slew of negative news, including US recession fear, negative earnings and guidance by major US tech giants, heightened geopolitical tensions in Middle East and the unwinding of Yen carry trades. Dow nosedived 1,034 pts to 38,703 given US recession fears and a string of downbeat tech behemoth earnings, which overshadowed an upbeat July ISM service report. Sentiment was also dampened by White house’s assessment that an imminent Iran’s retaliatory strikes on Israel may happen in the next 12-24 hours. 

Malaysia. Tracking the Wall St and regional markets’ slump, KLCI dived 74.6% or 4.6% (the lowest since Covid 19 in Mar 2020) with all 30 component stocks took a beating. Market breadth deteriorated 0.05 vs 0.12 previously with daily volume surged 79% to 9.25bn shares valued at RM7.96bn. On fund flows, local institutions (+RM546m, Aug:+RM353m, YTD: +RM3.82bn) were the primary net buyers while foreigners (-RM336m, Aug: -RM224, YTD: RM267m) and local retailers (+RM99m, Aug: -RM129m, YTD: -RM3.88bn) emerged as the key net sellers. 

Outlook In sync with global markets’ rout and the ongoing Bursa Aug results season coupled with potential margin calls, KLCI may extend its downtrend, align with a seasonally weak month of Aug (average KLCI growth for 10Y/20Y: -1.1%/-1.4%). Major supports are now revised lower to 1,474-1,500-1,518 while resistance areas are situated near 1,554-1,570-1,593. 

VIRTUAL PORTFOLIO Yesterday, we had closed our positions on MNHLDG (8.2% loss), NOTION (10.5% loss) and AGRICOR (7.8% loss) amid bearish technicals.

Source: Hong Leong Investment Bank Research - 6 Aug 2024