Heading towards stiff hurdle at 1,638 after refilling the 1,593-1,609 gap

Technical pick – IOIPG 

KLCI: 1612.35 (2.8)
DOW: 40008.39 (242.8)
MSCI Asia: 179.03 (1.2)
FCPO (RM): 3724 (1)
BRENT (USD): 79.76 (-0.93)
USDMYR: 4.4202 (-0.027)
SGDMYR: 3.361 (-0.001)
EURMYR: 4.8736 (0.017)
AUDMYR: 2.9331 (-0.004)
GBPMYR: 5.6807 (-0.008)
US: 10-yr yield (%) 3.8352 (-0.008)
BNM:10-yr yield (%) 3.755 (0.004)

Asia/US. Mirroring an overnight rally from Wall St, Asian markets edged higher after soft US PPI data boosted rate-cut bets, overshadowed the bearish SHCOMP (slid to 6M low) amid concerns over falling new loans growth in July (1st drop in 19 years), as well as upcoming key corporate earnings and economic prints. Ahead of tonight’s key retail sales data, the Dow soared 243 pts to 40,008 after an in-line July CPI data further solidified disinflation traction and the prospect of a rate cut on Sep 18’s FOMC meeting. The current consensus points to a 64% probability of 25 bps cut and a 36% probability of 50 bps cut. 

Malaysia. Fuelled by the higher regional markets, an appreciating RM and expectations of a strong Malaysia 2Q24 GDP data (16 Aug), KLCI rose 2.8 pts to 1,612.4 (its 7th gain in 8 days). Market breadth rebounded to 1.31 vs 0.47 previously while daily volume grew 4.4% to 3.57bn shares valued at RM2.51bn. Local institutions (-RM33m, Aug: +RM953m, YTD: +4.42bn) alongside retailers (-RM8m, Aug: -RM281m, YTD:  RM4.24bn) were the major net sellers while foreign investors (+RM41m, Aug: -RM672m, YTD:  RM181m) returned as major net buyers for a 2nd session. 

Outlook After refilling the 1,593-1,609 gap, KLCI should extend rebound along with the Wall St amid Fed’s rate-cut optimism, as well as positive expectations of a strong 2Q24 GDP and resilient Aug results season. However, after rallying 83.4 pts from 1,529 (6 Aug low) and 157.7 pts YTD, KLCI could face some stiff hurdles at 1,638-1,654 levels (support: 1,584-1,600). 

Technically, IOIPG should rebound further to RM2.25 in anticipation of a positive 4QFY24 earnings (28 Aug) following the downtrend line breakout and a firm close above 200D MA. A successful breakout will extend uptrend towards the RM2.37-2.55 (YTD high)-RM2.74 (123.8%FP) zones going forward. Key support is pegged at RM1.95-2.00-2.08 levels.

Source: Hong Leong Investment Bank Research - 15 Aug 2024