Volatility returns amid rising Middle East tensions and continued net outflows by foreigners 

KLCI: 1606.66 (10.6)
DOW: 39357.01 (-140.5)
MSCI Asia: 175.5 (0.1)
FCPO (RM): 3730 (22)
BRENT (USD): 82.3 (2.64)
USDMYR: 4.454 (0.03)
SGDMYR: 3.363 (0.022)
EURMYR: 4.8667 (0.036)
AUDMYR: 2.939 (0.026)
GBPMYR: 5.6835 (0.038)
US: 10-yr yield (%) 3.9035 (-0.036)
BNM:10-yr yield (%) 3.745 (0.003)

Asia/US. Asian markets ended mixed after recent relief rally as investors awaited key economic data from the US (i.e. PPI, CPI, retail sales) and China (i.e. housing price, industrial production and retail sales) for insights on the path of the economy and monetary policy.  Dow slipped 140 pts to 39,357 while the safe haven US 10Y bond yield lost 3 bps to 3.91% and Brent prices surged 2.2% to USD81.9 as investors assessed upcoming major economic data and heightened geopolitical tensions as Pentagon deployed more forces and military hardware to the Middle East. 

Malaysia. In anticipation of a strong Malaysia 2Q24 GDP release on 16 Aug and continuous local funds support as the government striving to improve the nation’s finances and fiscal deficit through structural reforms and various long-term growth plans, KLCI jumped 10.6 pts to 1,606.7, recording its 5th gain in the last six days. Market breadth was positive at 1.59 while daily volume fell 4.5% to 4.01bn shares valued at RM2.91bn. Local institutions (+RM56m, Aug: +RM1.05bn, YTD: +4.52bn) alongside local retailers (+RM18m, Aug: -RM327m, YTD:  RM4.29bn) while foreign investors were the major net sellers for a 6th straight day (-RM74m, Aug: -RM730m, YTD:  RM239m). 

Outlook After rallying 78 pts from a weekly low of 1,529 (6 Aug), KLCI could face some choppy times ahead, aligning with a seasonally weak month of Aug (average KLCI growth for 10Y/20Y: -1.1%/-1.4%), as investors weigh the upcoming major US and China economic prints coupled with escalating Middle East conflicts. Locally, impending release of Malaysia’s 2Q24 GDP and expectations of a resilient Aug results season coupled with strong local funds support may cushion the external shocks (key support: 1,565-1,588-1,600; resistance: 1,612-1,638). 

Technically, SMRT is likely to revisit RM1.20-1.28 zones (support: RM0.975-1.03-1.08) after building its base above the support trendline (near 200D MA at RM0.975), supported by positive earnings prospects and technical readings, as well as the emergence of EPF as major shareholder (5.02%). 

Source: Hong Leong Investment Bank Research - 13 Aug 2024