The FTSE Bursa Malaysia KLCI (KLCI) rebounded 7.5 points to 1,733.4 on Tuesday, snapping a seven-session losing streak, as investors rotated into commodity, banking, telecommunications and plantation stocks.
Hong Leong Investment Bank (HLIB) Research said the local benchmark bucked weaker Wall Street and regional market cues, with buying interest seen in counters including SD Guthrie, Petronas Chemicals, Press Metal, CIMB Group, Telekom Malaysia and Malayan Banking.
Despite the index rebound, market breadth deteriorated to 0.57 from 0.89, indicating that declining stocks continued to outnumber advancers.
Trading activity increased, with 3.75 billion shares changing hands, above the five-day average of 3.58 billion shares. Total turnover stood at RM2.91 billion, broadly in line with the five-day average of RM2.92 billion.
Foreign institutional investors remained net sellers for the 11th of the past 12 trading sessions, recording net outflows of RM188 million.
This brought their cumulative net selling to RM778 million over the past five sessions, RM1.44 billion month-to-date and RM3.92 billion year-to-date.
The selling was absorbed by domestic investors, with local retailers recording net buying of RM106 million, while local institutions bought RM82 million.
Year-to-date, local institutions remained the strongest net buyers with cumulative inflows of RM4.34 billion, while local retailers were net sellers of RM410 million.
HLIB said the KLCI remains in a healthy near-term consolidation phase after climbing 95 points from its year-to-date low of 1,655 on June 29 to 1,750 on Aug 6.
The index subsequently declined in seven of the past eight sessions, reaching 1,722 before recovering to 1,733.4.
Despite the recent pullback, the medium-term uptrend remains intact, with the KLCI trading above its rising 30-, 50-, 100- and 200-day moving averages.
The relative strength index (RSI) remained constructive at 56.7, although momentum has weakened, with the moving average convergence divergence (MACD) turning marginally bearish.
HLIB said the index is currently consolidating around the 1,730 level, corresponding to the 76.4% Fibonacci retracement level, with 1,750 serving as a key resistance.
A breakout above 1,750 could signal renewed upside towards 1,764, representing the weekly upper Bollinger Band, followed by the year-to-date high of 1,771.
On the downside, a break below 1,720 could increase selling pressure and push the index towards the 1,700 level.
HLIB expects the KLCI to remain range-bound in the near term amid persistent external and domestic uncertainties.
These include heightened Middle East tensions, the peak August corporate results season and continued foreign fund outflows.
Political developments could also add to investor caution, with HLIB noting that the Barisan Nasional (BN) victory in Johor and strong BN-Perikatan Nasional performance in Negeri Sembilan point to a shifting political landscape.
Potential state elections in Melaka, where the current term is due to end in December 2026, and Sarawak, where the term is due to end in February 2027, could add to political uncertainty.
Uncertainty surrounding the timing of the 16th General Election, whose current parliamentary term runs until December 2027, together with closer BN-PN cooperation, could remain an overhang on market sentiment.
Against this backdrop, HLIB said investors could remain in risk-off mode, keeping the KLCI range-bound despite the underlying medium-term uptrend.
