MARKET REVIEW

Global. Tracking record highs from US bourses, Asian markets rose following Beijing’s decision to lower banks’ reserve requirements to prop up the economy, offsetting concerns of the resurgence of the Covid-19 pandemic in the region, and ahead of the US inflation data (tonight) and Powell’s testimony (Wed’s night) for further clues on the economic recovery from Covid-19 and the timeline for asset tapering. In anticipation of a promising start to the US 2Q21 results season this week, all three US major indexes ended at record closing highs ahead of the US inflation data and Powell’s testimony, overcoming WHO’s warning that the Delta variant was becoming dominant and could dampen the pace of global economic recovery.

Malaysia. After rebounding 11.9 pts last Friday, selling pressures resumed (KLCI: -7.7 pts to 1512.9) amid nagging worries about weakening economic outlook due to an unwavering number of Covid-19 cases and extended lockdowns coupled with the domestic fluid politics. Retail investors (+RM59m; 5D: +RM341m) surpassed local institutions (+RM37m; 5D: +RM54m) as the major net buy flows with a 42.6% participation rate (vs local institutions 41.4%). Meanwhile, foreign investors continued their net selling (-RM96m; 5D: -RM395m) after recording -RM324m outflow last week.

TECHNICAL OUTLOOK: KLCI

After staging a mild rebound to 1525 yesterday, selling spree returned as the KLCI fell 7.7 pts to 1512.9. We believe the bears could still continue to control the market as long as the benchmark fails to recover successfully above stiff resistances at 1528-1545-1556 territory. The immediate support level is seen at the 1500. If a decisive breakdown arises, a fresh selldown to 1490-1474-1452 zones is anticipated. Reiterate risk-off mode amid heightened headwinds in the market.

MARKET OUTLOOK

In the short term, the bears could still continue to control the market as long as the benchmark fails to recover successfully above the congested resistances at 1528-1545- 1556 territory amid corporate earnings (likely to report weaker 2Q21 earnings in Aug) and political risks, as well as unabated local Covid-19 pandemic (R0 surged to 1.15 on 11 July vs 1M low at 0.90 on 12 June). Nevertheless, significant fall is likely to be cushioned near (1474-1490-1500) by the aggressive vaccination rollouts as a total of 421k doses were administered yesterday.

Source: Hong Leong Investment Bank Research - 13 Jul 2021