MARKET REVIEW

Global. Asian markets ended mixed as investors adopted a cautious approach ahead of the US inflation data (10 June) for clues on the Fed’s tapering timeline, and renewed Sino U.S. tensions following Biden’s order last week banning US investments in certain Chinese companies. The Dow tumbled as much as 177 pts to 34453 before paring its losses to 30 pts at 34600 as investors preferred to wait-and-see ahead of the US May CPI data. Meanwhile, the US 10Y Treasury yield slipped 0.04% to 1.53%, suggesting bond investors do not see a spike in inflation despite lingering inflation woes.

Malaysia. After falling 19.4 pts in the last two days, KLCI staged a 9.5-pt technical rebound amid bargain hunting on banking and tourism blue chips. Market breadth improved mildly with the gainers/losers (G/L) ratio rose to 1.01 from 0.75 last Friday, as sentiment was boosted by a falling number of daily new cases (from a peak of 9020 cases) and the government’s pledge to accelerate the vaccination programme. Foreign institutions (+RM102m; 5D: -RM94m) joined retailers (+RM4m; 5D: +RM427m) as net buyers after net sold RM136m equities last week. Meanwhile, local institutions continued to offload RM106m shares, following net outflows of RM333m last week.

TECHNICAL OUTLOOK: KLCI

After staging a technical rebound from 1552 (YTD low), KLCI is still unable to break the 1603 downtrend line (DTL). In our view, current sideways consolidation mode will prevail unless the index can surpass these hurdles successfully. Key supports are pegged at 1577- 1552 zones. Only a strong close above the DTL may accelerate further upside momentum towards 1611-1623-1646 upside targets again.

MARKET OUTLOOK

While we still believe a recovery is an eventuality, the tug-a-war between slowing economy and elevated Covid-19 infections against expectations of widespread vaccination rollouts, abundant liquidity, and prevailing low-interest rates will continue to play out in the market. Key resistances are pegged at 1603-1611-1623 levels whilst supports are situated at 1577- 1566-1552 territory.

On stock selection, Sunway (HLIB Research-BUY TP RM2.11) remains our top property pick given its well-integrated property, construction and building material operations. The impending divestment of a 20% stake to a strategic shareholder could reveal the underlying  massive value of the healthcare business (plan for listing with a potential market cap larger than Sunway). Following the bullish Harami pattern, a breakout confirmation above RM1.66 will spur the stock higher towards RM1.70-1.80 zones, underpinned by bottoming up oscillators. Key supports are pegged at RM1.50-1.57 levels.

Source: Hong Leong Investment Bank Research - 9 Jun 2021