Not out of the woods yet as recent rout often lead to unexpected ruptures in markets 

KLCI: 1591.87 (17.5)
DOW: 38763.45 (-234.2)
MSCI Asia: 173.95 (2.3)
FCPO (RM): 3746 (49)
BRENT (USD): 78.33 (1.85)
USDMYR: 4.498 (0.023)
SGDMYR: 3.3867 (0.015)
EURMYR: 4.9089 (0.026)
AUDMYR: 2.9545 (0.054)
GBPMYR: 5.7163 (0.029)
US: 10-yr yield (%) 3.9431 (0.051)
BNM:10-yr yield (%) 3.759 (0.017)

Asia/US. Asian markets continued to recover from Monday’s rout, buoyed by an overnight rebound on Wall St and BOJ Deputy Governor Uchida’s comment that the central bank would not hike interest rates amid market instability. After surging as much as 481 pts in early trades driven by dovish signals from both the Fed and BOJ, Dow skidded to end -234 pts at 38,763 after a weak USD42bn sale of 10Y Treasuries. The dour sentiment was also driven by lingering concerns of hard landing in the US economy, negative earnings guidance by major US tech giants, heightened geopolitical tensions in Middle East and the unwinding of Yen carry trades. 

Malaysia. Tracking the Wall St and regional markets’ rebound, KLCI jumped 17.5 pts to 1,591.9. Market breadth further improved to 3.93 from 3.5 a day ago with daily volume stood at 5.1bn shares valued at RM4bn. Local institutions (+RM109m, Aug: +RM577m, YTD: +RM4.04bn) continued to lead our Bursa higher as major net buyers while foreigners (-RM44m, Aug: -RM298, YTD: +RM193m) and local retailers (-RM65m, Aug: -RM279m, YTD:  RM4.24bn) emerged as key net sellers. 

Outlook After rallying 62 pts or 4.1% from a 4M low of 1,529 (Aug 6) to 1,591 yesterday, KLCI could face some profit taking, as external headwinds persist amid the unwinding of the yen carry trade, deep escalation of the Middle East conflict and fears of a US downturn. On local front, earnings uncertainty ahead of the Bursa Aug results season and potential margin calls could see KLCI encounter major barriers at 1,593-1,607-1,615 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 1,529-1,554-1,584 levels.

VIRTUAL PORTFOLIO  Yesterday, we had closed our Trading Sell position BAT (3.4%).

Source: Hong Leong Investment Bank Research - 8 Aug 2024