MARKET REVIEW

Global. Led by the routs in Dow (-1.6%) and Nikkei 225 (-3.6%), Asian markets slipped (MSCI Asia Ex-Japan: -1.0% to 688.2) as investors weighed on the repercussions of the Fed’s surprise hawkish shift in its latest policy decision. Following a 3.5% WoW slump as the Fed’s hawkish tilt spooked investors, the Dow staged a 1.8% or 587 pts relief rally at 33877 amid bargain hunting on cyclical and technology stocks. Overall, the tug of war between the dovish and hawkish stance is here to stay for a while as the Fed continues to show the divide on the timing of the tightening policy.

Malaysia. After surging 18.2 pts last Friday at the eleventh hour ahead of the FTSE KLCI rebalancing exercises, KLCI surrendered most of the gains yesterday (-16.8 pts to 1572.2) as sentiment was jolted by the hawkish comments from the US Fed. About 6.0 bn securities were traded for RM2.8bn, compared with 6.3bn shares worth RM4.8bn last Friday whilst market breadth was bearish as 784 losers thumped 309 gainers. Domestic institutions emerged as the major net buyers with net outflows of RM64m (45% of trading value; 5D: - RM142m) after net sold RM303m last week, followed by local retail investors (+RM121m; 39.2% of trading value; 5D: +RM350m). Foreigners resumed net selling (-RM185m; 15.8% of trading value; 5D: -RM208m) after net buy RM314m securities last Friday.

TECHNICAL OUTLOOK: KLCI

KLCI seesawed between 1567 and 1581 yesterday before settling at 1572.2, a tad below the key 200D SMA at 1577. Reiterate sideways consolidation going forward until the congested resistances at 1590-1603 is taken out successfully. On the downside, key supports are situated at 1565-1552 zones. A decisive breakdown below 1552 (YTD low) may send the index lower towards 1545 (61.8% FR) and 1533 (20M SMA) levels.

MARKET OUTLOOK

The overnight rally in Wall St may provide a fillip to local bourse today but any rebound is likely to be capped near 1590-1610 zones as investors grapple with a hawkish Fed, unabated Covid-19 cases nationwide, the impact of the FMCO extension to the economy and corporate earnings, and domestic fluid politics. However, we believe the downside risk is likely to be cushioned near 1545-1552-1566 zones, as the structured National Recovery Plan (NRP) with objective thresholds should help control the Covid-19 pandemic in a more sustainable matter, particularly the acceleration of the nationwide vaccination programme with full vaccination rates to 40% target by Sep/Oct and 60% by Nov/Dec.

Source: Hong Leong Investment Bank Research - 22 Jun 2021