MARKET REVIEW

Global. Tracking a sluggish Wall St, Asian markets ended lower (MSCI Asia Ex-Japan - 0.5% to 696) after the Fed took a hawkish turn, forecasting two interest rates hikes as early as 2023 (from 2024) while raising its growth and inflation forecasts, as well as planning about when to start tapering its bond buying. Conviction in the strength of the US economic recovery triggered a rotation from cyclicals and reopening plays to growth stocks, driving the Nasdaq 0.9% higher at 14161 whilst a post-Fed hangover pushed the Dow (-210 pts to 33823) lower for a 4th consecutive day amid Fed’s hawkish tilt and an eventual tapering remarks.

Malaysia. KLCI fell for a 3rd straight day (-7.5 pts to 1570.9) as investors weighed on the National Recovery Plan (NRP) details, the Fed’s hawkish stance, the timing of Parliament reopening, and domestic fluid politics. Sentiment was cautious as 611 losers beat 360 gainers with a total of 4.3bn shares (-0.4bn shares vs 16 June) transacted at RM2.7bn (- RM0.4bn vs 16 June). Foreign investors (-RM165m; 5D: -RM381m) were the major net sellers for the 3rd consecutive day whilst the local institutions (+RM77m; 5D: +RM109m) and retailers (+RM88m; 5D: +RM284m) emerged as the major net buyers in equities.

TECHNICAL OUTLOOK: KLCI

There is no change in our sideways consolidation view with a slight negative bias, given that the index is now trading below 200D SMA at 1577. Lower supports are pegged at 1564 (lower BB), 1552 (YTD low) and 1545 (61.8% FR) zones. The tug-a-war between the bulls and the bears will continue at the moment, unless the index can recapture above key resistances at 1577, 1590 (50D SMA) and DTL (or 1600 levels) hurdles successfully.

MARKET OUTLOOK

In the short term, KLCI will continue to trend sideways with a slight negative bias, given that the index is now trading below 200D SMA at 1577. Nevertheless, we still believe the downside risk is likely to be cushioned near 1545-1552 zones, as the nationwide vaccination programme is gaining strength and targeting to hit above 300k shots daily from July/August onwards after crossing above 200,000 jabs this week. On stock selection, we like UCHITEC (HLIB Research-BUY TP RM3.83) for its (i) stable earnings drivers for being the sole supplier and R&D partner for its customers; (ii) involvem ent in the indispensable market of coffee and biotech division; (iii) business commanding higher margin vs peers; and (iv) attractive dividend yield of ~6% with tendency to tilt on the upper side. The stock should attract bargain hunters on weakness for recovery upside towards RM3.23-3.35-3.55 zones whilst strong supports are situated at RM3.10-3.00-2.92 levels.

Source: Hong Leong Investment Bank Research - 18 Jun 2021