MARKET REVIEW

Global. Asian markets ended mixed as investors digested a breakdown in OPEC+ talks and the resurgence of Covid-19 infections due to the highly infectious Delta and Lambda variants. Ahead of the release of June FOMC minutes tonight, the Dow plunged as much as 428 pts to 34358 before paring the losses to 209 pts at 34577. Overall, the sentiment was bogged down by a weaker June ISM Services PMI (-3.9 to 60.1), falling financials (tracking a 0.07% slide in US 10Y treasury yield to 1.35%) and oil & gas (Brent oil prices plunged 2.7% after OPEC+ meeting was cancelled) stocks.

Malaysia. Ahead of the upcoming BNM meeting on 8 July, KLCI fell 0.7-pt to 1531.6 after moving tightly between 1530.8 and 1536.5 range, as investors continued to weigh on the aggressive vaccination rollouts (administered a daily record high 340k doses yesterday) and the repercussions of EMCO over most parts of Klang Valley (contribute ~40% of GDP) to contain the spiking daily Covid numbers (+19.8% to a monthly high of 7654 cases). Local institutions returned as the largest net seller -RM69m followed by foreign investors -RM23m (net sellers for a 12 th consecutive day). Meanwhile, retail investors stayed as the net buyers (RM92m) for the 16th consecutive day.

TECHNICAL OUTLOOK: KLCI

KLCI has been trending sideways in the last four days within 1525 -1541 levels. The formation of Dojis (on 2 & 5 July) at the lower end of its downtrend channel may signal limited downside risks. Nevertheless, until a successful breakout 1541-1552 hurdles, the odds would favour more weakness ahead with key supports at 1500-1510-1525 zones. Conversely, once the key resistances near 1541-1552 levels are taken out, the index can proceed higher towards 1569 (30D SMA0 and 1579 (200D SMA) zones next.

MARKET OUTLOOK

In the near term, lingering domestic headwinds i.e. the fluid domestic political scene, a delayed economic recovery, and elevated local Covid-19 cases may continue to dampen sentiment, with key supports pegged at 1500-1510-1525 levels (Resistances: 1541-1552- 1569). Nevertheless, the bearish sentiment would improve amid aggressive vaccination rollouts and more states (Penang, Kelantan, Pahang, Perak, Terengganu, and Perlis as of 7 July) migrate into Phase Two of the National Recovery Plan.

Source: Hong Leong Investment Bank Research - 7 Jul 2021