BELOW are excerpts of viewpoints from two selected research houses on what investors can expect in the day ahead:
Inter-Pacific Research
Malaysian equities headed south again to reach its lowest level in two years as selling on energy and plantation stocks sent the market lower.
Much of the weakness was on commodity stocks as their selling prices retreated on concerns of lower demand ahead if the global economy enters recession.
The selling also extended to lower liners and broader market shares, hence causing market breadth to stay overwhelmingly negative.
Market conditions are likely to stay morbid, undermined by the lower commodity prices that could leave plantation and energy stocks further in the cold.
At the same time, interest rate sensitive stocks like property developers could also see reduced following due to the hike in interest rates albeit banking stocks look to stay firm for now as they would benefit from the higher rates.
Consequently, the downside risk remains even as there are signs that global equities are attempting to find some measure of stability from their recent sell-down.
While a rebound may emerge following yesterday’s steep falls, any recovery on the FBM KLCI could be modest as market interest is still thin as most market players are still on the sidelines awaiting for a clearer market direction.
After the recent falls, the key index could attempt to find support at the 1,420 level for now as this is seen as a strong support level.
If it fails to hold to that level, the next supports are lowered to 1,407 and the psychological 1,400 points. On the other hand, the resistances are at 1,430 and 1,437 points respectively.
Malacca Securities Research
The FBM KLCI plummeted as selling pressure in consumer and plantation heavyweights weighed on the key index.
Traders should also monitor closely the Brent crude amid sliding commodity markets which could be pricing in recession worries given the global oil benchmark is currently trading around the US$100 psychological level.
Meanwhile, crude palm oil (CPO) price violated below the key RM4,000/metric tonne (MT) level, closing just below RM3,900/MT in anticipation of higher stockpiles in Malaysia while gold price extended its decline below US$1,750.
While we think the local bourse is set for bargain hunting activities following mildly higher movement from Wall Street, we opine that the upside could be capped amid the falling commodities environment.
The FBM KLCI fell further from its daily EMA9 and closed just above the immediate support at 1,420. Technical indicators remained mixed as the MACD Histogram extended a positive bar while the RSI remained below 50.
The next support is located along 1,400-1,420 while resistance is pegged along 1,460-1,480. – July 7, 2022
