MARKET REVIEW

Global. Tracking lower Dow, Asian bourses ended mixed as markets struggled for direction ahead of the release of the FOMC minutes. Sentiment was also fragile amid the resurgence of Covid-19 infections due to the highly infectious Delta and Lambda variants as WHO urged "extreme caution" against lifting public health measures in countries around the world. Taking cue from the sliding US 10Y treasury yield (-0.03% to 1.32% and -0.45% from 52-week high 1.77%), the S&P 500 (+0.3% to 4358) and Nasdaq (+0.1% to 14665) closed at record highs whilst the Dow jumped 0.3% to 34681, after the June FOMC minutes pointed substantial further progress on economic recovery "was generally seen as not yet having been met" to begin the long-awaited tapering program.

Malaysia. KLCI fell as much as 8.2 pts to a fresh YTD low at 1523 amid lingering worries over the economic repercussions stemming from the extended lockdowns (especially in the Klang Valley which contributes ~40% of our nation GDP). However, the index pared the losses to -1.5 pts at 1530.1 after the PM announced the appointment of Ismail Sabri as DPM and Hishammuddin Hussein as a Senior Minister. Retail investors (+RM70; 42.3% to value; 5D: +RM34m) replaced local institutions (+RM34; 40.9% to value; 5D: +RM230m) as the largest net buyers yesterday whilst6 foreign investors remained as the net sellers for a 13 th consecutive day (-RM104; 16.8% to value; 5D: -RM264m).

TECHNICAL OUTLOOK: KLCI

KLCI has been trending sideways in the last five days within 1523-1541 levels. The formation of Dojis and hammers during a grossly oversold position and at the lower end of its downtrend channel may signal limited downside risks. Nevertheless, until a successful breakout above 1541-1552 hurdles, the odds would favour more weakness ahead with key supports at 1500-1510-1523 zones. Once the key resistances near 1541-1552 levels are taken out, the index may advance towards 1568 (30D SMA) and 1579 (200D SMA) zones.

MARKET OUTLOOK

Ahead of the reopening of the Parliament sitting on 26 July, the nagging fluid domestic political scene (after UMNO Supreme Council has decided to revoke the party’s support for the PN government with immediate effect), a delayed economic recovery, and elevated local Covid-19 cases may keep investors on tenterhooks (Supports: 1500-1510; Resistances: 1541-1552-1568). Nevertheless, we believe the bearish sentiment would soon 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. Meanwhile, we expect BNM to maintain OPR at 1.75% today, and monitor closely current situation before the next course of action.

VIRTUAL PORTFOLIO POSITION-FIG1

Yesterday, we squared off INARI (0.3% gain) and FOCUSP (1.3% gain) due to the expiry of our recommended trading duration of 4 weeks

Source: Hong Leong Investment Bank Research - 8 Jul 2021