Volatility to stay elevated amid a confluence of headwinds 

KLCI: 1574.39 (37.9)
DOW: 38997.66 (294.4)
MSCI Asia: 171.62 (5.6)
FCPO (RM): 3724 (19)
BRENT (USD): 76.48 (0.18)
USDMYR: 4.4748 (0.048)
SGDMYR: 3.3715 (0.02)
EURMYR: 4.8829 (0.034)
AUDMYR: 2.9003 (0.045)
GBPMYR: 5.6876 (0.045)
US: 10-yr yield (%) 3.8919 (0.104)
BNM:10-yr yield (%) 3.742 (0.022)

Asia/US. After a disastrous performance on Monday, Asian markets ended mostly higher as some normalcy has started to return to the markets, led by a 10.2% relief rally on Nikkei 225 after sliding 12.4% (worst drop since Black Monday in 1987) in the previous session. After plummeting 2,185 pts in three consecutive session, the Dow rose 294 pts to 38,997 on bargain hunting as a semblance of calm returned to the market, with recent dovish comments by Fed officials and pushed back the notion of US recession worries. On earnings front, UBER and PLTR share prices jumped on upbeat earnings while ABNB and SMCI plunged (extended hours) on sluggish earnings.

Malaysia. Tracking the regional markets’ rebound, KLCI surged 37.9 pts to 1,574.4. Market breadth shot up to 3.5 from 0.05 a day ago with daily volume stood at 6.4bn shares valued at RM5.31bn. On fund flows, local institutions (+RM115m, Aug: +RM468m, YTD: +RM3.94bn) were the primary net buyers while foreigners (-RM30m, Aug: -RM254, YTD: +RM237m) and local retailers (-RM85m, Aug: -RM214m, YTD:  RM4.17bn) emerged as key net sellers. 

Outlook Despite the long-awaited technical rebound, we expect volatility to stay elevated, as external headwinds persist amid the unwinding of the yen carry trade, deep escalation of the Middle East conflict and fears of a US recession. On local front, earnings uncertainty ahead of the Bursa Aug results season and potential margin calls could see KLCI encounter stiff hurdles at 1,584-1,596-1,607 territories, align with a seasonally weak month of Aug (average KLCI growth for 10Y/20Y: -1.1%/-1.4%). Major supports are now pegged at 1,500-1,529-1,554 levels.

Source: Hong Leong Investment Bank Research - 7 Aug 2024