MARKET REVIEW

Global. Asian markets ended moderately higher in line with overnight gains in the US markets, boosted by reassuring comments from the Fed officials on inflation and monetary policy starting to allay some of the fears about the Fed’s latest hawkish tilt. After registering a 2-day rally of 655 pts, the Dow ended -71 pts to 33874 whilst the Nasdaq closed at another fresh record high (+18 pts to 14271). The USD index inched up 0.06% to 91.8 and the US 10Y bond yield rose 0.02% to 1.49 as the hawkish talks continued after two Fed officials said that a period of high inflation in the US could last longer than anticipated, a day after Fed Chair Jerome Powell played down rising price pressures.

Malaysia. Bucking higher regional markets, KLCI slid 9.3 pts to 1564.8 as sentiment was dampened by the World Bank’s downgrade of Malaysia's 2021 GDP growth to 4.5% (from 6% in March) amid Covid-19 flare-up, slower-than-expected vaccination coupled with the re-imposition of the MCO. Market breadth was bearish with 716 losers outnumbered 297 gainers. Local retailers emerged as the major buyers (+RM147m; 40.3% of trading value; 5D: +RM451m) whilst domestic institutions (-RM85m; 43.3% of trading value; 5D: - RM211m) and foreign investors (-RM82m; 16.4% of trading value; 5D: -RM240m) turned net sellers in securities.

TECHNICAL OUTLOOK: KLCI

Following yesterday’s weak performance as benchmark had broken the two major supports at 1577 (200D SMA) and 1566 (lower BB) levels, KLCI near term outlook has turned increasingly negative, with a crucial floor at 1552 (YTD low). A decisive breakdown below 1552 (YTD low) may send the index lower towards 1545 (61.8% FR) and 1533 (20M SMA) levels. On the upside, only a strong recapture above 1577 – 1600 (downtrend line) hurdles can negative the current sluggish momentum.

MARKET OUTLOOK

Current KLCI’s range bound consolidation mode (Supports: 1545-1552; Resistances: 1577- 1589-1600) is here to stay for a while, as investors continue to weigh on the Fed’s latest policy shift, high Covid-19 cases nationwide, domestic political landscape (as the national emergency order ends on 1 Aug), 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 may cushion further slide, 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 - 24 Jun 2021