Ahead of the MSCI rebalancing on 31 August, most Asian markets traded mixed on Monday as investors weighed renewed US-Iran strikes for the first time in about a month, which pushed oil prices above USD90 per barrel, alongside a more hawkish Fed outlook following Warsh’s Jackson Hole remarks. Sentiment was also dampened by weaker Chinese data. China’s August Composite PMI edged up to 49.5 but remained in contraction, while industrial profit growth slowed to 17.6% in the first seven months. These concerns overshadowed fresh property-support measures and continued strength in the banking sector.
Wall Street ended lower (Dow -0.70%, S&P 500 -0.33%, Nasdaq -0.12%) as US 10Y yields rose for a 5th straight session to 4.76%, their highest since Jan 2025. Higher oil prices stoked inflation concerns, lifting the probability of a 25bp Fed rate hike at the Sep 16 FOMC meeting to 65%, from 41% a week ago. On the corporate front, Nvidia bucked the selloff, gaining 1.4% after announcing a USD3.5bn stake in MediaTek, expanding its exposure to global chip production and AI infrastructure. This week,
investors will focus on earnings from Broadcom, Dell and Snowflake, while key macro catalysts include US employment data, the Fed’s Beige Book and speeches from Fed officials, all offering further clues on the interest-rate outlook.
Ahead of the extended Merdeka Day on 31 Aug, MSCI rebalancing and the final stretch of the Aug results season, the KLCI slid 15.8pts to 1,725.9 on 28 Aug, while trading activity surged to 5.06bn shares (5D avg: 4.12bn) worth RM6.51bn (5D avg: RM4.11bn), reflecting institutional portfolio restructuring ahead of the MSCI changes. Selling was concentrated in YTL, YTLPOWR, TENAGA, PBBANK, MISC and CIMB. Foreign institutions remained heavy net sellers for 17 of 19 trading sessions in Aug, following a RM299m net inflow in Jul (-RM239m; 5D: -RM377m; Aug: – RM1.98bn; YTD: -RM4.46bn), while local retailers (+RM212m; 5D: -RM118m; Aug: +RM379m; YTD: -RM0.44bn) and institutions (+RM27m; 5D: +RM259m; Aug: +RM1.58bn; YTD: +RM4.90bn) continued to absorb the selling.
After rallying 95 pts from its YTD low of 1,655 on 29 Jun to 1,753.2 on 26 Aug, the KLCI has entered a healthy consolidation to end at 1,725.9 (+0.98 pt MoM). Despite the cautious sentiment, the medium-term uptrend remains intact, with the index holding above MA50 (1,711), MA100 (1,710) and MA200 (1,698). A decisive breakout above 1,734 (MA20) would signal renewed upside towards 1,753, 1,766 (weekly upper BB) and the YTD high of 1,771. Conversely, a break below 1.698-1,710 would heighten downside risk towards 1,685 (50% FR).
HLIB sees the KLCI likely to remain range-bound amid persistent external and domestic headwinds, with investors weighing heightened Middle East tensions, the conclusion of Aug results season and continued foreign outflows. Rising political
uncertainty, including speculation over GE16 timing (term due Dec 2027) and closer BN-PN cooperation, could add to the overhang and keep investors in a risk-off stance
