LT uptrend intact barring a breakdown below 1,638-1,660 support

Technical pick – NOTION 

KLCI: 1670.2 (-6.5)
DOW: 40975 (38)
FCPO (RM): 3888(-45)
BRENT (USD): 72.7 (-1.05)
USDMYR: 4.342 (-0.01)
SGDMYR: 3.332 (-0.01)
EURMYR: 4.811 (0.0)
US: 10-yr yield (%) 3.75 (-0.08)
BNM:10-yr yield (%) 3.76 (-0.01)

Asia/US. In line with an overnight slump on Wall Street, Asian markets ended sharply lower, led by selloffs in Taiwan (-4.5%) and Japan (-4.2%) amid NVDA's rout and sluggish US ISM manufacturing data, which heightened recession fears. After a 626-pt slide on Sep 3, the Dow rebounded by as much as 235 pts before settling +38 pts at 40,975. Meanwhile, the US 10Y bond yield fell by 8 bps to 3.76%, as weak ISM manufacturing data and sluggish job openings increased bets for a 50-bps cut at the Sep 18 FOMC meeting. Investors will parse on the ISM services (5 Sep) and nonfarm payrolls (6 Sep) reports for further economic and policy insights. 

Malaysia.  After rallying 148 pts from 1,529 (Aug 5 Black Monday), KLCI slipped for a 3rd straight day on profit taking (-6.5 pts at 1,670.2). Market breadth continued to slide to 0.38 vs 0.97 previously while daily volume inched up 2% to 3.04bn shares valued at RM2.89bn. Foreign institutions (+RM286m, Sep: +RM537m, YTD: +RM3.58bn) alongside local retailers (+RM2m, Sep: +RM7m, YTD: -RM4.80bn) emerged as major net buyers while local institutions (-RM288m, Sep: -RM544m, YTD: +RM1.22bn) continued their net outflows for the 7th consecutive session. 

Outlook Mirroring wild swings on Wall St and healthy profit taking pullback (support: 1,629-1,638-1,660; resistance: 1,690-1,710) after surging 141 pts from 1,529, KLCI is expected to remain choppy in the near term. However, downside is likely to be cushioned by positive domestic economic outlook and stable corporate earnings, strong FDI commitments, progressive domestic reform initiatives, RM appreciation, Fed’s pivot, coupled with increased risk appetite by foreigners (YTD: +RM3.58bn). 

Technically, after sliding 65.5% from 4Y high of RM2.45 (24 June) to RM0.845 (Aug 5 low), NOTION is consolidating well above key support of 200D MA or RM0.88 (lower support: 0.845) before ending at RM1.05 yesterday. A decisive breakout above RM1.21 (3 Sep high) will enhance the probability to revisit RM1.38 (50% FR) and RM1.63 (38.2% FR) zones.

Source: Hong Leong Investment Bank Research - 5 Sept 2024