MARKET REVIEW

Global. As economic optimism battles inflation worries, Asian markets ended mixed following a lower-than-expected China May's Caixin PMI services data and nagging concerns about prospective runaway inflation in the US and a gradual scale back of bond purchases by Fed. The Dow tumbled as much as 266 pts in early trades before paring the losses to 23 pts at 34577 ahead of the US jobs report tonight, as signs of a recovery in the jobs market following upbeat private job gains and lower weekly jobless claims reports.

Malaysia. KLCI slipped 7.4 pts to 1590.6 amid persistent concern of surging Covid-19 infections locally despite the ongoing full lockdown. Market breadth was mixed as losers 545 edged 530 gainers with a total of 6.9bn shares transacted valued at RM3.6bn. Local institutions (+RM41m; 5D: -RM528m) joined retailers (+RM57m; 5D: +RM318m) as net buyers of equities after 11 days of consecutive net selling whilst foreign investors net sold RM61m of equities after net bought RM371m in the last 5 days.

TECHNICAL OUTLOOK: KLCI

Following the FMCO announcement last weekend, KLCI fell to a low of 1568 on 31 May before recovering at 1590.6 yesterday despite numerous attempts to break the critical downtrend line (DTL) resistance near 1605. Unless staging a successful breakout above this hurdle, short term consolidation mode will prevail with key supports at 1583-1577-1552 zones. Closing above 1605 may indicate that the index is heading to retest the 1623-1646 levels again.

MARKET OUTLOOK

In the short term, KLCI will remain in consolidation mode as the tussle between slowing economy and elevated Covid-19 infections against further widespread vaccination rollouts, abundant liquidity, and prevailing low interest rates (BNM may cut OPR by another 25bps on 8 July should local Covid-19 situation deteriorates) continue to play out in the market. Key resistances are pegged at 1600-1605-1623 levels whilst supports are situated near 1583-1577-1552 territory.

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of the market uncertainty, we decided to square off FRONTKN (14.8% return) on 3 June.

Source: Hong Leong Investment Bank Research - 4 Jun 2021