Global. Ahead of the key US May CPI data tonight, Asian markets ended mixed yesterday as investors digested China’s May PPI (higher-than-expected 9%) and May CPI (lower than-expected 1.3%), coupled with the World Bank’s upgrade of the 2021 global economic growth to 5.6% (from 4% earlier). Led by a decline in financials as the US 10Y Treasury yield fell 0.04% to 1.49%, the Dow erased the early 55 pts gains to end 152 pts lower at 34447, ahead of the inflation data for clues on the Fed’s tapering timeline.

Malaysia. In sync with the weak regional markets, KLCI drifted sideways before falling 6.5 pts to 1581.5 as investors weighed on the rebound in Covid-19 cases yesterday and the timeline of acceleration in daily vaccination to 300000 daily jabs by August. Foreign institutions (-RM103m; 5D: -RM155m) resumed selling whilst retailers (+RM83m; 5D: +RM252m) and local institutions (+RM20m; 5D: -RM97m) were the major net buyers.

TECHNICAL OUTLOOK: KLCI

After staging a technical rebound from 1552 (YTD low), KLCI is still unable to break the 1603 downtrend line (DTL) resistance. In our view, current sideways consolidation mode will prevail unless the index can surpass these hurdles successfully. Key supports are pegged at 1577-1567-1552 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 more aggressive 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 1577-1567-1552 territory.

Source: Hong Leong Investment Bank Research - 10 Jun 2021