MARKET REVIEW

Global. Ahead of the key FOMC meeting outcome and US Treasury Secretary Yellen’s testimony tomorrow, Asian markets ended mostly flat (MSCI Asia Ex-Japan -0.1%) as investors expect the Fed to stick to its dovish mantra despite the prospects of a broadening US economic recovery and rising inflation pressures (generally view as transitory). The Dow tumbled as much as 194 pts to 34199 before paring the losses to 94 pts at 34299, as investors assessed the strong May PPI and a soft May retail sales reports, ahead of the FOMC decision tomorrow.

Malaysia. Ahead of the Malay rulers’ special meeting today and FOMC outcome (17 June), as well as the National Recovery Plan announcement (after 5pm), KLCI eased 1.1 pts to 1581.4 after hovering at a tight range of 1578.6-1586.1 levels. Foreign investors (-RM41m; 5D: -RM238m) and local institutions (-RM3m; 5D: +RM8m) turned net sellers whilst retailers (+RM44m; 5D: +RM230m) emerged as the major net buyers in equities.

TECHNICAL OUTLOOK: KLCI

In the wake of the FMCO extension to 28 June, we reiterate that the tug-a-war between the bulls and the bears will continue at the moment, unless the index can surpass 1591 (50D SMA) and DTL (or 1600 levels) hurdles successfully. Further upsides from here are situated at 1623-1646 levels. 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 today and FOMC outcome (17 June). Nevertheless, there is light at the end of the tunnel with downside risk is cushioned near 1552-1566 zones, as investors weigh on the National Recovery Plan announcement (comprising a detailed four-phase Covid-19 exit strategy) and acceleration in daily vaccination rates to 300-400k jabs by end Aug.

On stock selection, we like IJM (HLIB Research - BUY TP RM2.29) due to the possible special dividend from the sale of IJMPLNT. Any further weakness on the stock will present a good entry for an eventual technical rebound to RM2.06-2.30 upside targets. Key supports are situated at RM1.73-1.81 territory.

Source: Hong Leong Investment Bank Research - 16 Jun 2021