Higher for longer rally but anticipate stiff hurdles at 1,690-1,710 territory

Technical pick – EATECH 

KLCI: 1678.8 (25.3)
DOW: 41563.08 (228)
MSCI Asia: 186.46 (1)
FCPO (RM): 3977 (37)
BRENT (USD): 78.8 (-1.14)
USDMYR: 4.3205 (0.01)
SGDMYR: 3.3173 (0.003)
EURMYR: 4.7882 (0.005)
AUDMYR: 2.9406 (0)
GBPMYR: 5.6964 (0.009)
US: 10-yr yield (%) 3.9034 (0.042)
BNM:10-yr yield (%) 3.759 (0.007)

Asia/US. Before the key US PCE price data was due in the evening, Asian bourses ended mostly higher, in line with an overnight rally on Wall St, due to easing recession fears and rising optimism of a rate cut on Sep 18 FOMC following lower weekly jobless claims and an upward revision in US 2Q GDP growth to 3%. Dow jumped 228 pts to end at a fresh record high to 41,563 amid a ‘Goldilocks’ economy and slower inflation growth (July core PCE: +2.6% YoY, consensus: +2.7%), cementing rate-cut optimism in Sep’s meeting. This week, investors will parse on the Aug jobs report, ISM manufacturing & services data, and job openings for further economic and policy insight. 

Malaysia. Mirroring higher US and regional markets, KLCI surged 25.3 pts to 1,678.8 (+43.1 pts WoW), led by utilities and banks ahead of the MSCI rebalancing last Friday. Market breadth staged a strong rebound to 1.83 after experiencing 8 consecutive days of steep losses. Foreign institutions (+RM416m, Aug: +RM2.55bn; YTD: +RM3.04bn) emerged as major net buyers while local institutions (-RM351m, Aug: -RM1.70bn; YTD: +RM1.77bn) alongside local retailers (-65RM26m, Aug: -RM848m; YTD: -RM4.74bn) were notable net sellers. 

Outlook In wake of the encouraging economic outlook and resilient corporate earnings, strong FDI commitments, supply chains shift, RM appreciation and Fed’s pivot, KLCI’s rebound from the Aug 5’s Black Monday (near 1,529) is poised to revisit 1,690-1,710 levels (support: 1,638-1,660), underpinned by an increased risk appetite by foreigners (Jul: +RM1.3bn, Aug: +2.5bn, YTD: +RM3.04bn) and bullish technical readings. 

Technically, after correcting 39.5% from 18M high at RM0.455 to a low of RM0.275 (5 Aug), EATECH is building its base near RM0.275-0.29. The stock will need a convincing breakout above RM0.34 (38.2% FR) to fuel further upside towards RM0.365 (50% FR) and RM0.385 (61.8% FR) levels. 

Source: Hong Leong Investment Bank Research - 2 Sept 2024