MARKET REVIEW

Global. Taking cues from the relief rallies in Dow (+1.8%) and Nikkei 225 (+3.1%), Asian markets ended higher (MSCI Asia Ex-Japan: +2.8 pts to 687.9) as the prospects of a gradual policy tightening allayed some of the fears about the Fed’s latest hawkish tilt. After the 587-pt rally on 21 June, the Dow ended +68 pts to 33945 after fluctuating within 33751 (-126 pts) and 34040 (+163 pts) levels while the Nasdaq ended at a record high (+111 pts to 14253). The positive performance was driven by Powell’s reiteration in a congressional hearing that the Fed intends to encourage a "broad and inclusive" recovery of the job market and not to raise interest rates too quickly based only on the fear of coming inflation.

Malaysia. KLCI inched up 1.8 pts to 1574 after hovering within a tight 1571.2-1577.6 band as investors weighed on the latest S&P affirmation of Malaysia's sovereign credit ratings and the Fed’s latest policy shift. About 5.9bn securities were traded for RM3.1bn, compared with 6bn shares worth RM2.8bn last Monday whilst market breadth was positive as 528 gainers beat 481 losers. Domestic institutions emerged as the major net buyers with net inflows of RM61m (45% of trading value; 5D: -RM78m) followed by local retail investors (+RM81m; 38.2% of trading value; 5D: +RM387m). Meanwhile, foreigners resumed net selling for a 2nd day (-RM142m; 16.8% of trading value; 5D: -RM309m) after net buying RM76m last week.

TECHNICAL OUTLOOK: KLCI

As KLCI’s tepid rebound yesterday remains a tad below the key 200D SMA or 1577 levels, we reiterate our sideways consolidation view going forward until the congested resistances at 1590-1603 levels are 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

Current KLCI’s range bound consolidation mode is here to stay for a while, as investors continue to weigh on the Fed’s latest policy shift, high Covid-19 cases nationwide and the impact of the FMCO extension to the economy and corporate earnings. However, more details on the National Recovery Plan (NRP) and potential mid-year window dressing activities could bring some excitement to the benchmark to recapture the key 1590-1603 congested resistances, as the government accelerates 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 - 23 Jun 2021