HAVING emerged the second best index in July after Singapore’s Straits Times Index (+3.5% month-on-month [mom]), CGS-CIMB Research expects the FBM KLCI to be range-bound in August with possible downside risk if there are negative surprises from the earnings season.
“The 2Q 2022 results seasons have been mixed so far,” observed the research house in a strategy note.
“Only 21% of companies under our coverage have released their 2Q CY2022 results with 29.6%/40.7%/29.6% of these companies posting results that were above/in line/below expectations.”
The key negative surprises during the results season so far came from glove makers while REITs (real estate investment trusts) that reported results posted better-than-expected earnings, according to CGS-CIMB Research.
Analysing the FBM KLCI’s historical data, the research house said past performance tended to be negative in the month of August with average -0.3%/-1.7% mom returns over the past 10 years/44 years.
“The 1,500 psychological level acts as the immediate resistance followed by the 1,515 mark,” envisages the research house. “Support is seen at the 1,460 levels for now. A break below the said levels is a warning sign of a deeper pullback to the 1,400-1,430 levels for the short- to medium-term.”
For August, CGS-CIMB Research expects investors’ attention to be on:
- Economy: The release of Malaysia’s 2Q 2022 gross domestic product (GDP) on Aug 12 and Malaysia’s July consumer price index (CPI) on Aug 26 will be closely tracked. Also in focus will be the OPEC meeting on Aug 3 and the Monetary Policy Committee (MPC) meeting of the Bank of England on Aug 4.
- Corporates: The market will be closely watching the 2Q 2022 results season, in particular how the labour shortage, rising raw material costs, higher minimum wage and supply chain issues would affect corporate earnings.
Also in focus will be the latest development on 5G deals between telcos and Digital Nasional Bhd (DNB), tourist arrivals figures and progress of the intake of new foreign workers following lifting of the temporary ban on Indonesia workers to Malaysia on Aug 1.
- Global: Investors will also be keeping an eye on the Russia-Ukraine conflict and its impact on commodity prices, global inflation, the US 10-year bond yields and global interest rates.
- Politics: Investors will be monitoring news flow on the possibility of an early 15th General Election (GE15) in 2022 and the ongoing Parliament sitting from July 18 to Aug 4. – Aug 2, 2022
