KLCI’s further rally will hinge on the ongoing peak earnings season

Technical pick – OSK 

KLCI: 1623.9 (11)
DOW: 40659.76 (96.7)
MSCI Asia: 182.89 (4.5)
FCPO (RM): 3681 (-73)
BRENT (USD): 79.68 (-1.36)
USDMYR: 4.4323 (-0.005)
SGDMYR: 3.3605 (-0.007)
EURMYR: 4.8711 (-0.016)
AUDMYR: 2.9415 (0.002)
GBPMYR: 5.7201 (0.016)
US: 10-yr yield (%) 3.8826 (-0.031)
BNM:10-yr yield (%) 3.759 (-0.002)

Asia/US. Mirroring a rally on Wall St, Asian markets ended mostly higher as a slew of US economic data alleviated recession fears in the US while mild inflation data kept traders pricing in a minimum 25 bps rate cut on 18 Sep FOMC meeting. Dow recorded its 4th consecutive gain (+97 pts at 40,660) as recent economic data eased concerns about a looming recession and bolstered expectations for a Sep rate cut. This week, investors will focus on S&P Global PMIs for manufacturing and services along with Powell’s speech at the Jackson Hole and July FOMC minutes, for further insights into the economy and monetary policy. 

Malaysia. Tracking Wall St’s rally, a positive 2Q24 GDP and 2H24 optimistic outlook coupled with a resumption of foreign net buying (after two weeks of net outflows totalling RM1.19bn), KLCI jumped 11 pts to 1,623.9 (+27.9 pts WoW). Market breadth improved further to 2.48 vs 0.37 previously while daily volume remained lacklustre at 3.23bn shares valued at RM2.76bn. Local institutions (-RM195m, WoW: -RM329m, Aug: +RM672m) alongside local retailers (-RM94m, WoW: +RM28m, Aug: -RM317m) were major net sellers whilst foreign investors (+RM289m, WoW: +RM301m, Aug: -RM355m) emerged as major net buyers for the 4th straight day. 

Outlook Encouraging economic and earnings outlook, a sustained RM appreciation and increased risk appetite by foreigners, coupled with positive technicals should extend KLCI’s rebound from its recent low of 1,529 (6 Aug). However, the benchmark may experience some volatility as earnings season accelerates (resistance: 1,638-1,650; support: 1,600-1,610). 

Technically, OSK is poised for further upside, bolstered by a piercing line pattern (6 Aug) and MACD golden cross formation. A successful refill of the RM1.53-1.56 gap may lift share price higher towards RM1.64-1.72-1.80 zones while downside supports are pegged at 1.44-1.49 levels.

Source: Hong Leong Investment Bank Research - 19 Aug 2024