MARKET REVIEW

Global. Ahead of the crucial US June jobs report, Asian markets ended lower (MSCI Asia ex-Japan: -0.93% to 690.4) as investors weighed in on the more contagious Covid-19 Delta strains and slower growth seen for Caixin China Manufacturing PMI. Ahead of the 4 July US Independence Day holiday, the S&P 500 (+0.75% to 4352) and Nasdaq (+0.81% 14639) ended at record highs whilst the Dow added 0.44% to 34786, lifted by an upbeat June jobs data (with unemployment rate inched up to 5.9%) that signals a continued buoyant recovery but was not seen as strong enough to respite the Fed hawks.

Malaysia. KLCI eased 0.9-pt to 1533.4 as investors continued to assess the implications of the EMCO over most parts of Klang Valley. Market breadth was negative as 529 losers edged 406 gainers. Overall, trading activity fell 3% WoW to an average daily value of RM2.8bn. In terms of fund flows, foreign investors net sold RM29m (its 10th consecutive day) whilst local institutions (+RM15m) and retail investors (+RM14m) were the net buyers in equities. WoW, both domestic institutions and retailers logged net buying flows of RM190m (-RM110m previously) and RM309m (+RM580m previously), respectively while foreign investors net sold RM499m (-RM470 previously) in securities.

TECHNICAL OUTLOOK: KLCI

The KLCI continued its southbound journey last week, diving from intraweek high on 1557 (28 June) to a low of 1529 (2 July) before ending at 1533 last Friday, tumbling 26 pts WoW (-94 pts or 5.8% YTD) to record its 2nd consecutive loss. Reiterate risk-off mode 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. Only a strong breakout above this hurdle may lift index higher towards 1566-1579-1589 overhead resistances.

MARKET OUTLOOK

Tracking recent key bearish supports’ breakdown, the bears are gaining control amid lingering domestic headwinds i.e. the fluid domestic political scene, a delayed economic recovery owing to the EMCO over most parts of Klang Valley (contribute ~40% of GDP), and elevated local Covid-19 cases (R0 rose to 1.07 on 3 July 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. Meanwhile, the focus is on the upcoming BNM meeting on 8 July. We expect BNM to maintain OPR at 1.75%, and monitor closely current situation before the next course of action.

Source: Hong Leong Investment Bank Research - 5 Jul 2021