Volatility ahead amid elevated US core CPI and FOMC meeting next week

Technical pick: SLVEST

KLCI: 1639.8 (-20.6)
DOW: 40861.71 (124.8)
MSCI Asia: 179.02 (-0.9)
FCPO (RM): 3870 (-31)
BRENT (USD): 70.61 (1.42)
USDMYR: 4.3298 (-0.012)
SGDMYR: 3.3249 (-0.003)
EURMYR: 4.7809 (-0.012)
AUDMYR: 2.8833 (-0.011)
GBPMYR: 5.6661 (-0.021)
US: 10-yr yield (%) 3.6534 (0.011)
BNM:10-yr yield (%) 3.737 (-0.011)

Asia/US. Ahead of the key US CPI and PPI data, Asian markets ended lower, led by a 1.5% slide on NIKKEI 225 (following hawkish BOJ remark and strengthening Yen) and a 0.8% fall on SHCOMP (amid lingering economic and policy uncertainties). The Dow staged a massive rebound to end +125 pts at 40,861 after plunging as much as 743 pts. The roller-coaster ride was boosted by a rally in the tech behemoths, overshadowed a faster-than-anticipated core CPI data. On the political front, the presidential debate raised chances for a Harris victory, boosting solar stocks and pushing crypto-linked ones down, including First Solar (+15.2%) and Coinbase (-1.3%). Ahead of the FOMC meeting on 18 Sep, investors will assess upcoming PPI (12 Sep), consumer sentiment (13 Sep), and retail sales (17 Sep) data for further economic and policy insights.

Malaysia. Mirroring the cautious regional markets and lack of local fresh catalysts, KLCI slid 20.6 pts to 1,639.8, led by selling spree on CIMB, PBBANK, IHH, MISC, PETDAG and PCHEM. Market breadth remained negative for the 7th straight day at 0.34 vs 0.96 previously while daily volume fell 3% to 2.96bn shares (Sep avg: 3.05bn) valued at RM3.35bn (Sep avg: RM3.28bn). After net buying RM2.66bn in the 12th straight session, foreign institutions (-RM130m, Sep: +RM1.03bn, YTD: +RM4.07bn) were the notable sellers local institutions (+RM113m, Sep: -RM1.06bn, YTD: +RM703m) alongside local retailers (+RM17m, Sep: +RM31m, YTD: -RM4.78bn) emerged as major net buyers. 

Outlook Ahead of the FOMC meeting (Sep 18), KLCI should trade sideways (support: 1,613-1,628; resistance: 1,650-1,660-1,690) amid caution over upbeat US core CPI data and the lack of further rerating catalysts. Technically, SLVEST is currently building its base at RM1.40-1.43 (61.8% FR) levels, before re-challenging higher upside targets at RM1.58 (mid BB) and RM1.70 (1M high) region
 

Source: Hong Leong Investment Bank Research - 12 Sept 2024