MARKET REVIEW

Global. Mirroring record closings from the US major indices, Asian markets ended broadly higher as sentiment was boosted by strong trade data from China and recent measure by China to lower banks’ reserve requirements to prop up the economy. After charting historical highs closing, the major US benchmarks ended lower on profit taking as investors weighed on the upbeat results from JP Morgan and Goldman Sachs against a 13Y high US CPI in June at 5%. Most economists viewed the hot inflation data was mainly driven by a temporary surge in the travel-rated services and used automobiles. Meanwhile, sentiment was also spooked by the highly transmissible Delta variant's surge, bringing new uncertainty to the economic recovery.

Malaysia. Tracking higher regional markets, KLCI jumped 6.7 pts to 1519.6 at the eleventh hour amid bargain hunting on the recently bashed down glove, telco and O&G heavyweights. Nevertheless, overall trading sentiment remained lukewarm with only RM2.5bn value transacted (vs 7D average RM3.1bn) amid lingering worries over the negative impact from prolonged lockdown and surging Coviud-19 cases (which hit another record high at 11079 yesterday). Retail investors (-RM27m; 5D: +RM222m) joined foreign institutions (-RM7m; 5D: -RM379m) as major net sellers whilst local institutions emerged as major net buyers (+RM34m; 5D: +RM157m) in equities.

TECHNICAL OUTLOOK: KLCI

KLCI continued its range bound consolidation mode after hitting a fresh YTD low at 1501 on 8 July. Current oversold rebound remains fragile as the benchmark fails to recover successfully above stiff resistances at 1525-1545-1556 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 1525-1545- 1556 territory amid economic and corporate earnings risks, compounded by a fluid domestic politics, given the elevated local Covid-19 pandemic (R0 surged to 1.16 on 13 July vs 1M low at 0.90 on 12 June). Nevertheless, significant fall is likely to be cushioned near 1490-1500 levels by the aggressive vaccination rollouts as another record high of 425k daily doses were administered yesterday (vs 7D average 364k).

Source: Hong Leong Investment Bank Research - 14 Jul 2021