MARKET REVIEW

Global. Asian markets ended flat after recent highs as worries of the more virulent Covid19 Delta + variants (which are now circulating in at least 80 countries) could dampen the pace of global economic recovery. The S&P 500 (+10 pts to 4290) and Nasdaq (+140 pts to 14500) closed at record highs overnight amid rallies in megacap tech stocks. Meanwhile, the Dow slipped 150 pts to 34283 after rallying 3.4% WoW, weighed down by cyclical and O&G stocks ahead of the OPEC meeting on 1 July and fears over a spike in COVID-19 cases across Asia.

Malaysia. After rallying 29 pts last week, KLCI slid 15 pts to 1544.7 (the lowest since Nov 2020) as sentiment was spooked by the fluid domestic politics and further extension of FMCO Phase 1 due to unabated Covid-19 infections. Market breadth was bearish with 976 losers vs 133 gainers. Foreign investors turned net sellers for the 6th consecutive day (- RM126m; 5D: -RM411m) whilst local institutions (+RM23m; 5D: -RM151m) and retail (+RM103m; 5D: +RM562m) investors were the net buyers in equities.

TECHNICAL OUTLOOK: KLCI

After fluctuating between 1557.6 and 1539.6, KLCI tumbled 15 pts to end at 1544.7, the lowest in 8 months following the extension of FMCO Phase 1. With the index still trading below the crucial neckline 1552 (support-turned-resistance), we reckon that the bears still have the upper hand. A decisive breach below 1539 may send the index lower towards 1532 (20M SMA), 1510 and 1500 levels. On the upside, only a strong breakout above the 1552-1568-1578 congested resistances can negate the current bearish momentum. Reiterate risk-off mode amid heightened market volatility.

MARKET OUTLOOK

Following the sharp breakdown below the crucial neckline 1552 (support-turnedresistance), we reckon that the bears still have the upper hand (Supports: 1539-1531-1510) as investors continue to weigh on the fluid domestic politics and the extension of FMCO Phase 1 (until the nation’s daily infections fall below 4000 cases). Nevertheless, the RM150bn PEMULIH stimulus package and potential mid-year window dressing activities may boost sentiment in the short term towards stiff resistances near 1552-1568-1578 levels.

Source: Hong Leong Investment Bank Research - 29 Jun 2021