Stiff hurdles at 1,638 zones

Technical pick – Senfong 

KLCI: 1609.52 (2.9)
DOW: 39765.64 (408.6)
MSCI Asia: 177.82 (2.3)
FCPO (RM): 3675 (-15)
BRENT (USD): 80.69 (-1.61)
USDMYR: 4.4472 (-0.007)
SGDMYR: 3.3618 (-0.001)
EURMYR: 4.8564 (-0.01)
AUDMYR: 2.9368 (-0.002)
GBPMYR: 5.6887 (0.005)
US: 10-yr yield (%) 3.8428 (-0.061)
BNM:10-yr yield (%) 3.751 (0.006)

Asia/US. Led by a 3.45% rally on Nikkei 225, Asian markets continued to recover from last week’s rout as traders weighed upcoming key economic data from the US (i.e. PPI, CPI, retail sales) and China (i.e. housing price, industrial production and retail sales), as well as ongoing Middle East tensions. Dow surged 408pts to 39,765 while the US 10Y bond yield slipped 6 bps to 3.84% as softer PPI data boosted rate-cut bets. Investors are now focusing on CPI (14 Aug) and retail sales (15 Aug) data for further insights on the path of the economy and monetary policy.

Malaysia. In line with higher regional markets and expectations of a strong Malaysia 2Q24 GDP release on 16 Aug, KLCI rose 2.9 pts to 1,609.5, recording its 6th gain in the last 7th session. Despite the gains, sentiment turned cautious as market breadth tumbled to 0.47 vs 1.59 previously while daily volume fell 14.7% to 3.42bn shares valued at RM2.50bn. Local institutions (-RM71m, Aug: +RM986m, YTD: +4.46bn) turned net sellers after net buying RM1.25bn in the last six consecutive session while local retailers (+RM54m, Aug: -RM273m, YTD:  RM4.23bn) alongside foreign investors (+RM17m, Aug: -RM713m, YTD:  RM222m) emerged as major net buyers 

Outlook After rallying 81 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 assess upcoming major US and China economic prints coupled with Middle East conflicts. Nevertheless, downside risks may be cushioned by positive expectations of a strong 2Q24 GDP and resilient Aug results season coupled with strong local funds support (key support: 1,564-1,587-1,600; resistance: 1,613-1,638). 

Technically, SENFONG should recover further to RM1.23 amid optimistic earnings outlook and decent dividend as technical readings are on the mend. A successful breakout will extend uptrend towards the RM1.35 (all-time high) and RM1.47 (123.6%FP) going forward. Key support is pegged at RM1.09-1.15 zones.

Source: Hong Leong Investment Bank Research - 14 Aug 2024