Extended consolidation ahead of the Sep 18 FOMC meeting amid US growth worries

KLCI: 1653.12 (-11.7)
DOW: 40345.41 (-410.3)
MSCI Asia: 182 (0.2)
FCPO (RM): 3898 (-19)
BRENT (USD): 71.06 (-1.63)
USDMYR: 4.3302 (-0.008)
SGDMYR: 3.3352 (0.003)
EURMYR: 4.8125 (0)
AUDMYR: 2.9186 (0.003)
GBPMYR: 5.7053 (-0.003)
US: 10-yr yield (%) 3.708 (-0.019)
BNM:10-yr yield (%) 3.74 (-0.01)

Asia/US. Asian markets ended mixed as investors awaited the crucial US NFP data in the evening. Also, strengthening yen continued to pressure Japanese equities while the economic uncertainties, persistent deflationary pressures and the lack of strong policy support dampened the Chinese markets. Led by tech stocks’ rout, Dow slid 410 pts to 40,345 (WoW: -1,218 pts) following a sluggish Aug NFP (Aug: 142k, consensus: 161k). On a separate note, comment from Fed Governor Waller amplified expectations of a larger rate cut in Sep, citing rising risks in the labour market. Ahead of the FOMC meeting on 18 Sep, investors will weigh the CPI (11 Sep), PPI (12 Sep), consumer sentiment (13 Sep), and retail sales (17 Sep) data for further economic and policy insights.

Malaysia. KLCI slid 11.7 pts at 1,653.1 (WoW: -25.7pts) after oscillating between +7 pts and -16.4 pts intraday, led by a sell-down on YTL, YTLPOWR, MISC, CDB, PETDAG, CIMB and TENAGA. Market breadth was negative for the 4th straight day at 0.48 vs 0.41 previously while daily volume tumbled 28.8% to 2.35bn shares valued at RM3.05bn. Foreign institutions (+RM61m, WoW: +798m; Sep: +RM798m) alongside local retailers (+RM67m, WoW: +RM162m, Sep: +RM162m) emerged as major net buyers while local institutions (-RM128m, WoW: -RM960m, Sep: +RM806m) continued their net outflows for the 9th consecutive session. 

Outlook Ahead of the 1st US presidential election debate (10 Sep), coupled with the crucial US economic indicators ahead of the FOMC meeting on 18 Sep, KLCI is expected to extend its profit taking consolidation (support: 1,629-1,638; resistance: 1,690-1,700). However, downside is likely to be cushioned by: (i) positive domestic economic outlook and stable corporate earnings, (ii) strong FDI commitments, (iii) political stability and progressive domestic reform initiatives, (iv) RM appreciation, (v) Fed’s pivot, and (vi) increased risk appetite by foreigners (YTD: +RM3.84bn) and a reprieve in foreign shareholding (June/July/Aug:19.5/19.6/19.8%).

Source: Hong Leong Investment Bank Research - 9 Sept 2024