Cautious mode ahead of the peak results season and Powell’s speech

Technical pick – YTLPOWR 

KLCI: 1635.32 (-7.5)
DOW: 40890.49 (55.5)
MSCI Asia: 184.53 (-0.5)
FCPO (RM): 3761 (7)
BRENT (USD): 76.05 (-1.15)
USDMYR: 4.379 (-0.003)
SGDMYR: 3.3488 (0)
EURMYR: 4.8682 (0.016)
AUDMYR: 2.9504 (0.002)
GBPMYR: 5.7048 (0.007)
US: 10-yr yield (%) 3.801 (-0.006)
BNM:10-yr yield (%) 3.759 (0)

Asia/US. Mirroring Wall St’s retreat overnight, most Asian markets ended mixed as investors braced for key upcoming economic reports (e.g. Japan’s inflation data, US manufacturing and services PMIs) as well as Fed officials and BOJ Governor speeches this week. Dow gained 55 pts to 40,890 Stocks climbed after dovish Fed’s July FOMC minutes and a big downward revision of US payrolls by the Bureau of Labour Stats, which reinforced bets the Fed will cut rates in Sep. On the corporate front, Target added 11.2% on strong 2Q24 earnings while Macy’s slid 12.9% after lowering its guidance.

Malaysia. KLCI extended its losses for a 2nd day (-7.5 pts to 1,635.3) after rallying 58.3 pts over the previous 7th straight session (9-19 Aug), led by selldown on MAYBANK, YTL, YTLPOWR, TENAGA and PBBANK. Market breadth was negative at 0.89 vs 0.42 previously while daily volume slid 11% to 3.28bn shares valued at RM2.90bn (-36%). Foreign institutions were notable net buyers for the 7th consecutive session (+RM271m, Aug: +RM757m, YTD: +RM1.25bn). In contrast, local institutions (-RM221m, Aug: -RM137m, YTD: +RM3.33bn) and local retailers (-RM50m, Aug: -RM620m, YTD: -RM4.58bn) emerged as major net sellers. 

Outlook Given the encouraging economic and earnings outlook, a sustained RM appreciation and increased risk appetite by foreigners, KLCI’s current rebound still has legs to revisit 1,660-1,680-1,700 levels following a healthy pullback. However, after rallying 180.7 pts/12.4% YTD, the index may experience some consolidation as earnings season reaches its peak (support: 1,610-1,625). 

Technically, YTLPOWR is ripe for a technical rebound after recent rout (-31.4% from all-time high RM5.47). The stock will need confirmed breakout above RM3.90 (200D MA)-4.10 (38.2% FR) barriers to advance towards RM4.65 (100MA) going forward, while the RM3.52 (Mar low) acting as crucial support to prevent further selldown towards RM3.25 (61.8% FR) levels

Source: Hong Leong Investment Bank Research - 22 Aug 2024