Risk-off mode prevails as investors weigh the peak of results season this week

Technical pick – 3A 

KLCI: 1638.96 (3.2)
DOW: 41240.52 (65.4)
MSCI Asia: 185.85 (0.4)
FCPO (RM): 3933 (9)
BRENT (USD): 81.43 (2.41)
USDMYR: 4.3488 (-0.026)
SGDMYR: 3.3384 (-0.005)
EURMYR: 4.8595 (-0.004)
AUDMYR: 2.9456 (0.002)
GBPMYR: 5.7354 (-0.007)
US: 10-yr yield (%) 3.816 (0.017)
BNM:10-yr yield (%) 3.751 (-0.008)

Asia/US. Mirroring a rally on Wall St, Asian markets surged as Powell signalled the “time has come” to pivot to monetary easing. However, gains were tempered by a 0.66% loss on Nikkei 225 amid concerns of revival in unwinding Yen carry trade and a slide in export heavyweights, following a surge in Yen after hawkish comment from the BOJ. The Dow continued its rally to all-time high at 41,420 following Powell’s pivot remarks at Jackson Hole and a strong US durable goods orders. However, strong profit taking narrowed the gains to 65 pts at 41,240 as investors awaited the NVDA’s results on Aug 28 and a raft of economic data (i.e. PCE inflation, personal spending, and personal income data for July along with the 2nd print of 2Q24 GDP) this week. 

Malaysia. In line with higher regional markets, KLCI soared 3.3 pts to 1,639, lifted by MAYBANK, TENAGA, SUNWAY, PMETAL, SIME and KLK. Sentiment was cautious as we enter the peak of results season this week, as losers thumbed gainers by 578 to 506 while daily volume fell 20% to 2.83bn shares valued at RM2.62bn. Local institutions emerged as major net buyers (+RM14m, Aug: -RM433m; YTD: +RM3.03bn) alongside foreign institutions (+RM2m, Aug: +RM1.05bn; YTD: +RM1.54bn) while local retailers (-RM16m, Aug: -RM618m; YTD: -RM4.58bn) were the notable net sellers. 

Outlook In wake of the encouraging economic and earnings outlook, a sustained RM appreciation, Fed’s pivot and increased risk appetite by foreigners, KLCI’s ongoing rebound still has legs to revisit 1,660-1,680-1,700 levels after a brief retreat. Nevertheless, given that KLCI had rallied 184 pts/12.7% YTD, it may experience brief consolidation as earnings season reaches its peak (support: 1,617-1,629). 

Technically, 3A (FIG#3) is rebuilding its base above support trendline near RM0.89 (200D MA). A decisive breakout above RM0.955 (76.4% FR) may lift the stock toward RM0.98 (YTD high) and RM1.02 (18M high). Major supports are pegged at RM0.855 (Aug 5 low)-0.89.

Source: Hong Leong Investment Bank Research - 27 Aug 2024