MARKET REVIEW

Global. Ahead of the crucial US June jobs report tonight, Asian markets fell on the 1st

trading day in 3Q after achieving broad gains in 2Q, as sentiment was spooked by a resurgence of the highly contagious Covid-19 delta variant and tightening restrictions could undercut an economic recovery. Brushing off a rapid re-acceleration in coronavirus cases in Asia and Europe, the Dow added 131 pts to 34633 whilst the S&P 500 stretched its 6th

straight all-time closing high (+22 pts to 4320), boosted by energy on rising oil prices, positive labour data and stable June ISM manufacturing PMI reports.

Malaysia. After sliding 3.2% in June, KLCI rose as much as 8.5-pt to 1541.1 but the gains were reduced to 1.6 pts at 1534.2 amid persistent worries over elevated local Covid cases would prolong lockdown measures and delay economic recovery. Market breadth was positive as 556 gainers beat 373 losers. Foreign investors continued their net selling for the 9th consecutive day (-RM82m; 5D: -RM471m) whilst local institutions (+RM58m; 5D: +RM54m) and retail investors (+RM24m; 5D: +RM417m) were the net buyers in equities.

TECHNICAL OUTLOOK: KLCI

Following the recent slump (-3.2% in June and -2.6% in 2Q), KLCI is under-siege as the bears are in total control. The 1500-1510 may act as a magnet to draw prices lower since the benchmark failed to reclaim above the crucial 1552 neckline resistance successfully. Conversely, a strong breakout above this hurdle may lift index higher towards 1566 -1578- 1589 overhead resistances. Reiterate risk-off mode amid heightened market volatility.

MARKET OUTLOOK

In the wake of recent multiple bearish supports’ breakdown, the bears are gaining an upper hand amid nagging concerns on the fluid domestic political scene, a delayed economic recovery owing to a prolonged FMCO and surging local Covid-19 cases (R0 rose to 1.06 from a monthly low of 0.90 on 12 June). The 1500-1510 may act as a magnet to draw prices lower since the benchmark failed to reclaim above the crucial 1552 neckline resistance successfully. On stock selection, we like VS (HLIB Research-BUY TP RM1.77) given its (i) healthy order outlook brought by the steady demand of consumer electronic products; (ii) margin expansion from customer diversification efforts, and (iii) prime beneficiary from the intensifying trade diversion catalyst. The stock appears to be in base building mode. A convincing breakout above the RM1.45 neckline resistance will lift prices to revisit all-time high at RM1.56. Key supports are pegged at RM1.29 (200D SMA) and RM1.25 zones.

Source: Hong Leong Investment Bank Research - 2 Jul 2021