Semblance of rationality returns but volatility prevails with key hurdles at 1,600-1,613-1,638 

KLCI: 1590.38 (-1.5)
DOW: 39446.49 (683)
MSCI Asia: 172.8 (-1.2)
FCPO (RM): 3732 (28)
BRENT (USD): 79.16 (0.83)
USDMYR: 4.473 (-0.025)
SGDMYR: 3.376 (-0.011)
EURMYR: 4.8879 (-0.021)
AUDMYR: 2.9296 (-0.025)
GBPMYR: 5.6684 (-0.048)
US: 10-yr yield (%) 3.9877 (0.045)
BNM:10-yr yield (%) 3.733 (-0.026)

Asia/US. Regional markets took a negative cue from weak overnight at Wall St amid lingering concerns over slowing US and China economy, lacklustre 2H24 guidance from the Big Techs, intensity of Fed cut in Sep meeting, and Middle East tensions.  After plunging 2,079 pts in the first five trading days in Aug, the Dow staged a 683-pt relief rally as the latest weekly jobless claims data allayed US recession fears. On earnings front, LLY jumped 9% amid earnings beat and positive guidance while WRD slid 9% on disappointing earnings. Meanwhile, the probability of a 50 bps cut in Sep fell to ~56% from 72% a day earlier (Fed Rate Monitor Tool) after Fed's Barkin cooled big rate-cut bets as he thinks the Fed has "some time" to assess whether this is an economy that's "gently moving into a normalizing state.

Malaysia. Tracking the pullback from Wall St and regional markets’, KLCI lost 1.5 pts in a choppy session. Market breadth fell to 0.68 from the bullish clips (average 3.7) in the last two sessions with daily volume stood at 4.3bn shares valued at RM3.1bn. Local institutions (+RM280m, Aug: +RM857m, YTD: +RM4.33bn) emerged as the major net buyers while foreigners (-RM227m, Aug: -RM525m, YTD: -RM34m) and local retailers (-RM53m, Aug: -RM332m, YTD:  RM4.29bn) were the major net sellers

Outlook Tracking overnight strong rebound from Wall St amid easing recession fear, KLCI may attempt to refill the 1,593-1,607 gap. However, we expect volatility along the away, in wake of the prevailing external headwinds. On local front, earnings uncertainty ahead of the Bursa Aug results season could see KLCI encounter major barriers at with formidable resistance at 1,613-1,638 zones, 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.

Source: Hong Leong Investment Bank Research - 9 Aug 2024