MARKET REVIEW

Global. Asian markets ended lower on profit-taking as the excitement from Beijing’s policy easing dissipated while rising US-China tensions and a resurgence of Covid-19 cases due to the highly transmissible Delta variant weighed on sentiment. In the midst of an ongoing 2Q21 results season (consensus expects S&P500 companies to grow 66%), the Dow ended +44 pts at 34933 after rising as much as 181 pts, as investors balanced worries about inflation with reassuring comments from Powell that a recent jump in inflation as temporary and the Fed will continue to offer "powerful support" to the economy "until the recovery is complete."

Malaysia. KLCI slipped 7.2 pts to 1512.3 as sentiment remained sluggish due to the domestic fluid politics and another record high of daily Covid-19 cases at 11618 yesterday (7D average 9682 and R0 surged to 1.19 on 14 July from FMCO’s low of 0.90). Retail investors (-RM30m; 5D: +RM122m) joined foreign institutions (-RM74m; 5D: -RM348m) as major net sellers for the 2nd day whilst local institutions were the net buyers (+RM104m; 5D: +RM226m) in equities for the 3rd consecutive session.

TECHNICAL OUTLOOK: KLCI

KLCI is expected to extend a prolong range bound consolidation mode after hitting YTD low at 1501 on 8 July. Any oversold relief rebound remains fragile as long as the benchmark fails to clear above stiff resistances at 1524-1545-1556 levels successfully. The immediate support level is seen at the 1500. If a decisive breakdown arises, it will open the door for further selldown towards 1490-1474-1452 zones. Reiterate risk-off mode amid heightened headwinds in the market.

MARKET OUTLOOK

Despite its steeply oversold positions, the bears could still continue to control the market. Any relief rebound remains fragile as long as the benchmark fails to clear above stiff resistances situated at 1524-1545-1556 levels successfully, on the back of economic and corporate earnings risks, compounded by a fluid domestic politics. Nevertheless, significant fall is likely to be cushioned near 1475-1490-1500 levels by the aggressive vaccination rollouts as another record high of 434k daily doses were administered yesterday (vs 7D average 373k), in tandem with Malaysia’s herd immunity target at 80% of the population by end-2021.

Source: Hong Leong Investment Bank Research - 15 Jul 2021