Tracking subdued Wall Street performance, Asian markets traded mixed as an AI-driven chip rally clashed with rising global inflation concerns, fuelled by higher energy costs amid ongoing Middle East tensions, with Brent crude nearing USD/bbl. While fears of software disruption weighed on broader Wall Street benchmarks, semiconductor shares surged on custom AI chip deals and resilient demand. These inflationary pressures have complicated upcoming central bank decisions, with traders pricing in rate hikes from the ECB and BOJ, while closely watching US PPI (10 Sep) and CPI (11 Sep) for policy cues ahead of the 16 Sep FOMC meeting.
Wall Street tumbled (Dow -0.77%, S&P 500 -0.48%, Nasdaq -0.64%, US10Y yield +5 bps) as soaring yields weighed on corporate margins and consumer demand. The 10Y Treasury yield surged to 4.84%, its highest since November 2023, after the Treasury Department said it would buy up to USD6bn of 10- to 20-year government bonds, below the consensus USD8bn-10bn. Meanwhile, the 7th month of the US-Israeli war on Iran continued to stoke fears of a broader regional conflict, with escalating US-Iran strikes pushing oil prices higher and fuelling inflation concerns ahead of next week’s Fed meeting. Risks to equities also increased as AI hyperscalers face higher borrowing costs to fund data-centre development.
In line with cautious regional markets, the KLCI was relatively unchanged, trading within a narrow 1,710.4–1,718.5 range. Market breadth improved to 1.04 from 1.00, while trading volume fell 11% to 3.67bn shares (5-day average: 3.93bn), valued at RM3.50bn (5-day average: RM3.06bn). On fund flows, foreign institutions returned as net sellers after two consecutive days of net buying (-RM90m; 5D: -RM36m; MTD: -RM581m; YTD: -RM5.04bn). On the flip side, local institutions (+RM13m; 5D: -RM233m; MTD: -RM76m; YTD: +RM4.82bn) and retailers (+RM77m; 5D: +RM269m; MTD: +RM657m; YTD: +RM0.21bn) emerged as net sellers.
After rallying 95 pts from its YTD low of 1,655 on 29 Jun to 1,753 (26 Aug’s high), the KLCI slid 57 pts to 1,696 before trending sideways to end at 1,714.3, maintaining a critical foothold above MA200 (1,700). The technical picture remains range-bound,
with the index hovering near the descending trendline. A decisive surge above the trendline and 1,730 (76.4% FR) invalidates the bearish bias, clearing a path toward 1,753 and the YTD high of 1,771. Conversely, a firm breach below 1,700 and 1,685
(50% FR) reignites downside risk toward 1,655 (YTD low) and 1,639 (23.6% FR).’
In the near term, the KLCI could remain choppy, with crucial support at the MA200, amid lingering headwinds as investors await US inflation data, heightened US-Iran escalation, and next week’s FOMC meeting, as elevated US yields could sustain foreign capital rotation away from EMs. Domestically, potential 2H earnings disappointments amid a higher-for-longer cost environment, the KLCI expansion overhang and emerging GE16 political jitters could further temper upside
