Blue chips held steady on Wednesday, ignoring the weaker regional tone after China inflation data confirmed the recovery in the world's second-biggest economy is losing steam. The KLCI ended 11.13 points up at the day’s high of 1,462.03, off an early low of 1,446.71, as gainers edged losers 430 to 417 on turnover of 3.16bn shares worth RM2.18bn.

Resistance at 1,464/1,470; Supports at 1,433/1,420

While sentiment has improved somewhat, stronger buying momentum and liquidity boost on the domestic market will be needed to promote sustained rise to higher ground. Immediate resistance for the index stays at last week’s high of 1,464, with 1,470, and the 1,490/1,500 level acting as tougher upside hurdles. Immediate support cushioning downside will be last week’s low of 1,433, with stronger supports seen at 1,420 and 1,400.

Bargain RHB Bank & Sime Darby

RHB Bank need convincing strength above the 123.6%FP (RM5.91) to enhance upside momentum towards the 138.2%FP (RM6.06) and 150%FP (RM6.18) ahead, while key retracement support at the 76.4%FR (RM5.41) cushions downside. Sime Darby needs breakout confirmation above the 25/03/22 high (RM2.38) to boost upside momentum and target the 123.6%FP (RM2.50), 138.2%FP (RM2.57) and 150%FP (RM2.63) going forward, while crucial support from the 50%FR (RM2.12) limits downside risk.

Weak China Data Weigh on Asian Markets

Asian markets close mixed on Wednesday as investors digested consumer and producer price data from China that showed both measures registering contractions simultaneously for the first time since 2020. The much-watched data on Wednesday showed China's consumer prices fell 0.3% in July from a year ago, slightly better than expected but the first decline since February 2021. Producer prices dropped for a 10th consecutive month. The data followed disappointing trade figures a day earlier that fuelled concerns about the global economic outlook. Markets are also waiting for the U.S. inflation report on Thursday, which is expected to show headline inflation picking up slightly in July to an annual 3.3% pace, while the core rate is seen unchanged at 4.8%.

Fed Bank of Philadelphia President Patrick Harker said the central bank may be able to cease rate hikes, barring any surprises in the economy, though rates would need to stay at their current elevated levels for some time. Mainland Chinese markets were lower, with the Shanghai Composite down 0.49% to 3,244.49 and the Shenzhen Component fell 0.53% to 11,039.45. Japan’s Nikkei 225 also lost 0.53% and closed at 32,204.33, while the Topix fell 0.4% to end at 2,282.57. Meanwhile, South Korea’s Kospi climbed 1.21% to 2,605.12, and Australia’s S&P/ASX 200 rose 0.37% to end at 7,338.00.

Wall Street Ends Lower Ahead of Inflation Data

The three major U.S. stock indexes closed lower overnight as traders brace for inflation data that will help shape the outlook for the Federal Reserve’s next steps. The Dow Jones Industrial Average lost 0.54% to finish at 35,123.36. The S&P 500 shed 0.70% to 4,467.71, while the Nasdaq Composite slipped 1.17% to 13,772.02. Traders are awaiting fresh readouts on inflation, via consumer and producer-price indexes due on late Thursday and Friday, respectively. The data will feed into expectations for future Federal Reserve interest-rate policy. Futures pricing shows a strong consensus that the Fed will stand pat at its next meeting. Meanwhile, traders also continued to digest Moody's downgrade of midsize US banks, a reminder that the problems that roiled the financial world in the spring are not yet in the past.

The health of the banking sector, as well as inflationary pressures, has played a part in the Federal Reserve's decision making during its rate-hiking campaign. Oil hit new peaks with Brent crude touching the highest price since April, as tighter supply owing to Saudi and Russian output cuts offset concerns over slow demand from China and a report showing rising U.S. crude inventories. On the earnings front, more than 90% of S&P 500 stocks have reported earnings as of Wednesday morning, and about four-fifths of those who have posted results have exceeded Wall Street’s expectations, according to FactSet.

Source: TA Research - 10 Aug 2023