Most Asian markets recovered from Tuesday’s losses as cooler-thanexpected US inflation eased expectations of further Fed rate hikes, while strong Wall Street bank earnings and ASML’s robust results revived optimism in AI-related technology stocks. Meanwhile, the SHCOMP lost 0.29% after retail sales rebounded 1% in June, industrial production grew 5.3%, and unemployment eased to 5%, although slower GDP growth highlighted lingering economic challenges.
Wall Street ended higher (Dow +0.29%, S&P 500 +0.38%, Nasdaq +0.62%) while the US10Y yield slipped 4 bps to 4.55% as softer-than-expected PPI data reinforced expectations the Fed will remain on hold at its 29 July FOMC meeting despite higher oil prices stemming from the escalating US-Iran conflict. Meanwhile, the US launched fresh strikes on Iran after Trump warned military action would intensify if Tehran refuses to engage in peace talks, raising fears of a prolonged conflict. On the Fed, President Williams said inflation remains “unquestionably too high” but sees encouraging signs it has peaked, while Chair Kevin Warsh reiterated the Fed’s commitment to restoring price stability in his congressional testimony without signalling
a more hawkish policy stance.
After rallying 65 pts from its YTD low of 1,655 to 1,720, the KLCI eased 0.36% (6.2 pts) in a healthy pullback, weighed by losses in PMETAL, PCHEM, PETGAS, CIMB, MAYBANK, AMBANK, CDB and MAXIS. Despite the decline, market breadth improved to 1.24 (vs. 0.98 previously), supported by stronger trading volume of 4.08bn shares (8-day average: 3.24bn) valued at RM2.84bn (5-day average: RM2.76bn).
Foreign investors were net buyers of RM141m, marking their fifth buying session in six days (5-day rolling: +RM427m; MTD: +RM93m; YTD: -RM2.69bn). In contrast, local institutions and retailers turned net sellers, offloading RM136m (5-day rolling: –
RM309m; MTD: -RM119m; YTD: +RM3.46bn) and RM5m (5-day rolling: -RM118m; MTD: +RM26m; YTD: -RM0.77bn), respectively.
KLCI’s rebound from the YTD low of 1,655 (29 June) has gained momentum after reclaiming the MA200 (1,680) and MA50 (1,700), reinforcing a near-term upside bias towards the 1,730–1,750 zone. However, a decisive break below 1,700 could trigger further downside towards 1,680 and 1,655.
Despite improving technical signals and renewed foreign inflows supporting further upside, HLIB Research noted that near-term volatility is likely to persist amid lingering Middle East tensions, global supply chain risks and a hawkish Fed stance. Domestically, BN’s landslide Johor victory has revived early GE16 speculation, while the upcoming Negeri Sembilan polls (1 Aug) and potential Melaka elections (term expires Dec 2026) could heighten political uncertainty. The elevated risk premium may cap KLCI gains and extend consolidation until a decisive break above the key rising trendline near 1,750.
