Heading towards 1,690-1,700 amid banks euphoria?

Technical pick – BAHVEST 

KLCI: 1675.24 (23)
DOW: 41091.42 (-159.1)
MSCI Asia: 185.93 (0.1)
FCPO (RM): 3897 (-23)
BRENT (USD): 78.65 (-0.9)
USDMYR: 4.3443 (-0.004)
SGDMYR: 3.3349 (0)
EURMYR: 4.8376 (-0.018)
AUDMYR: 2.9513 (0.002)
GBPMYR: 5.7451 (-0.01)
US: 10-yr yield (%) 3.8349 (0.013)
BNM:10-yr yield (%) 3.747 (0.009)

Asia/US. Asian bourses ended mixed as investors braced for the NVDA results due this morning and lingering economic headwinds in China. SHCOMP slid to 8M low after Canada said it would impose a 100% tariff on imports of Chinese EVs and 25% on steel and aluminium. The Dow tumbled as much as 408 pts before paring its losses to -159 pts at 41,091 in the run-up to the highly anticipated results from NVDA for insights into the sustainability of the AI boom. Investors are also watching upcoming major economic data (i.e. PCE inflation, personal spending, personal income data and the 2nd print of 2Q24 GDP) later this week that could indicate the trajectory of future Fed rate cuts. After hours, NVDA plunged 5.9% despite reporting 2Q results that beat estimates, as its sales forecast fell short of lofty market expectations.

Malaysia. Bucking lower regional markets, KLCI rallied 23 pts to 1,675.2, buoyed by gains in banking, telco and plantation stocks. However, market breadth remained negative for a 7th consecutive session at 0.52, led by sell down in property, technology, energy and construction stocks. Local institutions emerged as major net sellers (-RM503m, Aug: -RM1.05bn; YTD: +RM2.42bn) alongside local retailers (-RM144m, Aug: -RM809m; YTD: -RM4.77bn) while foreign institutions (+RM647m, Aug: +RM1.86bn; YTD: +RM2.35bn) emerged as notable net buyers. 

Outlook In wake of the encouraging economic outlook and a sustained buying interests on banking stocks, RM appreciation, Fed’s pivot and increased risk appetite by foreigners, KLCI’s ongoing rebound is poised to revisit 1,690-1,700 levels following two major overhead resistance breakouts at 1,638 (17 July high) and 1,660 (20 Aug high). 
Technically, BAHVEST showed signs of bottoming up after crossing above RM0.48 (20D MA), supported by robust volume. A decisive breakout above 200D MA or RM0.51 bodes well for further rally towards RM0.545 (100D MA) and RM0.59 (23.6% FR). Major supports are pegged at RM0.445-0.48 levels.

VIRTUAL PORTFOLIO We had closed our position on LGMS (7.1% loss) amid weakening technical readings.

Source: Hong Leong Investment Bank Research - 29 Aug 2024