Further Volatility on Global Selloff

Bursa Malaysia shares plunged on Monday, following the spillover selloff on global markets from last Friday as investors priced in higher risk for US recession due to the weak July jobs data and Iran’s threat of a retaliatory military strike on Israel. The FBM KLCI tumbled 74.57 points, or 4.63%, to close at 1,536.48, off an opening high of 1,593.36 and low of 1,532.24, as losers trashed gainers 1,659 to 83 on strong volume totalling 9.26bn shares worth RM7.97bn.

Key Chart Supports at 1,504/1,472; Resistance at 1,588/1,600

Given the continuing global markets selloff, further downside volatility can be expected nearterm, with the local benchmark index seen to test key chart supports before bouncing back. On a further selloff, look for key retracement supports to hold base, which are at 1,504 and 1,472, the respective 50%FR and 61.8%FR of the rise from June 2023 (1,369 low) to July 2024 (1,638 high), with the 200-day moving average support (1,533) already tested yesterday.

Immediate resistance on any oversold rebound attempts will presently be at the 100-day ma (1,588), and then 1,600.

Bargain Genting & GENM

Further selloff on Genting Berhad should attract buyers looking for oversold rebound ahead, with key chart supports at the Oct 2023 lows (RM4.00) and Nov 2022 low (RM3.80) capping downside, and overhead resistance seen at the 50%FR (RM4.52), 61.8%FR (RM4.66) and 76.4%FR (RM4.83). Likewise, Genting Malaysia will be very attractive to bargain on further selloff, with crucial supports seen at the Oct 2023 (RM2.30) and Nov 2022 (RM2.20) lows, and upside hurdles on oversold rebound viewed at the 38.2%FR (RM2.52), 50%FR (RM2.58) and 61.8%FR (RM2.65).

Nikkei-225 Sank 12.4% Into Bear Market, Worst Since 1987 Black Monday

Japan stocks confirmed a bear market on Monday as Asian markets continued the sell-off from last week, with the Nikkei 225 and Topix plunging over 12%. The benchmark indexes have fallen more than 20% from their all-time highs on July 11. The 12.4% loss on the Nikkei — which saw it close at 31,458.42 — was the worst day for the index since the “Black Monday” of 1987. The loss of 4,451.28 points on the index was also the largest in terms of points in its entire history. South Korea’s Kospi fell 8.77%, closing at 2,441.55, and the small-cap Kodaq saw a 11.3% wipeout, ending at 691.28. Due to the magnitude of the sell-off, the exchanges hit circuit breakers, halting trade for 20 minutes. Circuit breakers are activated if stocks rise or fall 8%.

Investors, meanwhile, awaited key trade data from China and Taiwan this week, as well as central bank decisions from Australia and India. China’s service sector expanded at a faster pace in July, with the country’s purchasing managers’ index climbing to 52.1 in July, up from 51.2 in June. Taiwan’s benchmark index, the Taiwan Weighted Index, was down over 8%, dragged by tech and real estate stocks, while Australia’s S&P/ASX 200 fell 3.7% to 7,649.6. The Reserve Bank of Australia kicks off its two-day monetary policy meeting Monday. Hong Kong Hang Seng index was down 1.46%, while mainland China’s CSI 300 fell 1.21% to 3,343.32, seeing the smallest loss in Asia.

Dow Plunge 1,000 Points in Global Market Selloff

US stocks fell sharply overnight, with the Dow Jones Industrial Average posting its worst day in nearly two years, as worries over the health of the U.S. economy sparked a global market sell-off. The Dow plunged 1,033.99 points, or 2.6%, to end at 38,703.27. The Nasdaq Composite lost 3.43% and closed at 16,200.08, while the S&P 500 slid 3% to end at 5,186.33. The blue-chip Dow and S&P 500 registered their biggest daily losses since September 2022. Japan’s stock market posted its worst drop since Wall Street’s Black Monday in 1987, contributing to fears of global turmoil in the markets. Fears of a U.S. recession were the main culprit for the global market meltdown after Friday’s disappointing July jobs report.

Investors are also concerned that the Federal Reserve is behind in cutting interest rates to bolster an economic slowdown, with the central bank choosing instead to keep rates at the highest in two decades last week. Investors are continuing to sell off megacap tech stocks and the once-hot artificial intelligence trade. Nvidia tumbled 6.4%, bringing its decline from its 52- week high to nearly 29%, and Apple cratered 4.8% after Warren Buffett’s Berkshire Hathaway cut its stake in the iPhone maker in half. There is also talk about unwinding of the yen “carry trade” adding fuel to the global market decline after the Bank of Japan raised interest rates last week, reducing the interest rate differential between Japan and the U.S. That has contributed to the yen rising in value versus the dollar, ending a practice of traders borrowing in the cheap currency to buy other global assets.

Source: TA Research - 6 Aug 2024