MARKET REVIEW

Global. Ahead of the key FOMC meeting outcome (17 June) and with multiple major markets in the region closed for holidays, Asian markets ended mixed (MSCI Asia Ex - Japan -0.02%) on profit taking after a recent rally (+6.3% from 1M low of 663 pts). After tumbling as much as 268 pts to 34211, the Dow ended -85 pts at 34393 whilst the S&P 500 closed at a record high (+8 pts to 4255) and the Nasdaq rallied 105 pts to 14174.

Meanwhile, the rally in bond markets lost steam as the US10Y Treasury yield gained 0.04% to 1.49% after sliding to 3M low at 1.43% (from 52-week high of 1.78%) last week, ahead of the 16-17 June FOMC meeting for clues about a timetable for scaling back monetary stimulus.

Malaysia. After falling 12.3 pts in the last three days, KLCI staged a 7.3 pts technical rebound to 1582.5 as sentiment was improved as daily Covid-19 new cases slid to near 1M low at 4949 (vs 9020 peak on 29 May) and expectations of further ramp up in daily vaccination rates to 300k jabs/day by Aug (from 150k currently). Market breadth was positive with 564 gainers beat 423 losers. Foreign institutions (+RM99m; 5D: -RM95m) turned net buyers after net sold RM427m last week. Meanwhile, local institutions (-RM98m; 5D: -RM95m) and retailers (-RM1m; 5D: +RM190m) turned net sellers after net bought RM109m and RM318m in equities last week.

TECHNICAL OUTLOOK: KLCI

KLCI staged a commendable ended 7.3 pts rebound to 1582.5, reclaiming above the crucial 200D SMA or 1577 levels. In the wake of the FMCO extension to 28 June and KLCI’s breakdown below the DTL (or 1600 levels), we reiterate ongoing consolidation mode to prevail unless the index can surpass 1591 (50D SMA) and 1600 hurdles successfully. Meanwhile, key supports are pegged at 1577-1566 (lower BB) and 1552 (YTD low).

MARKET OUTLOOK

While we still believe a recovery is an eventuality, investors may turn cautious about the heightened risks of economic and corporate earnings growth prospects (following an extension of the FMCO to 28 June) as well as the upcoming Malay rulers’ special meeting (16 June) and FOMC meeting outcome (17 June). Nevertheless, there is light at the end of the tunnel as we expect downside risks are cushioned by the government’s pledge to further ramp up in daily vaccination rates and the declining daily new cases in the last few days. We maintain our short term range bound call for now as the KLCI continues to trade within the 1577-1566-1552 supports whilst resistances are pegged at 1591-1600-1610 levels.

Source: Hong Leong Investment Bank Research - 15 Jun 2021