MARKET REVIEW

Global. Asian markets ended mildly higher, as investors weighed on a firm Caixin/Markit manufacturing PMI for May in China, the upcoming key US jobs data and Fed officials speeches for clues on the central bank's policy stance. The Dow surged as much as 320 pts to 34849, boosted by a strong April ISM manufacturing data and energy shares (after the OPEC+ alliance agreed to hike output gradually in July and gave a bullish forecast). However, the index ended only +45 pts at 34575 amid nagging concern about inflation, as investors await the US Fed officials’ speeches tonight and a crucial May employment report this Friday.

Malaysia. After a sluggish performance on Monday, KLCI ended steadily higher with a 2.4- pt gain to 1585.9, as the Phase 1 FMCO (1-14 June) started yesterday. Market breadth was positive as the G/L ratio jumped to 1.12 from 0.32 on Monday, boosted by the RM40bn PEMERKASA+ package and the government’s pledge to further ramp up in daily vaccination rates in the 2H21. After net buy RM236m shares last week, foreign institutions (-RM41m; 5D: +RM253m) joined local institutions (-RM216m; 5D: -RM614m) as net sellers whilst the retailers (+RM257m; 5D: +RM361m) were the major net buyers for the 6th consecutive Day.

TECHNICAL OUTLOOK: KLCI

Following the FMCO announcement last weekend, KLCI tumbled to a low of 1568 on Monday before ending at 1586 yesterday. We reiterate our view that current consolidation mode will prevail unless KLCI is able to stage a successful breakout above the 160 6 (LT downtrend line from 1696) levels. A successful clearance would spur the index towards higher upsides near 1623-1646 levels. Conversely, a decisive fall below 1577 (200D SMA) would accentuate further slide 1552 (YTD low) and 1540 (lower downtrend channel) zones.

MARKET OUTLOOK

KLCI could extend its consolidation mode as investors weigh on the repercussion of the FMCO amid escalating risks of earnings disappointment and slower economic activities (HLIB has downgraded 2021 GDP forecast to 4.6% from 5% previously). Nevertheless, we expect the market impact from the latest full lockdown to be less severe against the MCO 1.0 in March 20, given the government’s pledge to further ramp up in daily vaccination rates and recent aid packages, abundant liquidity and low interest rates (BNM may cut OPR by another 25bps on 8 July should the lockdown prolong beyond a month. Key resistances are pegged at 1600-1623 levels whilst supports are situated near 1577-1552-1540 territory.

Source: Hong Leong Investment Bank Research - 2 Jun 2021