MARKET REVIEW

Global. Asian markets rose in early trades amid expectations of China’s policy support and the Fed’s dovish view that inflation is transitory. However, the gains were erased owing to concerns over persistently high Covid-19 cases in the region that could muddy the recovery. Despite reassuring comments from Powell that it is still too soon to scale back monetary support and ongoing upbeat 2Q21 results season, the Dow tumbled 299 pts or 0.9% to 34678 (-0.5% WoW) as persistent worries about high inflation (following a strong run of June retail sales and falling weekly jobless claims) and a resurgence of the Covid-19 from the highly transmissible Delta variant.

Malaysia. KLCI slipped as much as 9 pts to 1511.8 on the back of the domestic fluid politics and worsening Covid-19 condition. However, the index recovered steadily to end +1.7 pts at 1522.5 (+1.9 pts WoW) amid news that EMCO imposed on all 34 sub-districts in Selangor will be lifted effective 17 July. Last Friday, foreign investors net sold RM56m in equities whilst the retail (RM38m) and local (RM28m) investors emerged as net buyers. WoW, both domestic institutions and retailers logged net buying flows of RM138m (+RM12m previously) and RM38m (+RM36m previously), respectively while foreign investors net sold RM174m (-RM324m previously) in securities, extending its net selling for the 4 th straight week.

TECHNICAL OUTLOOK: KLCI

WoW, KLCI gained 1.9 pts to 1522.5 in a less volatile mode after gyrating within a tight 1509-1525 band (vs 1501-1536 in the week ending 9 July). Following the slide on 8 July, the KLCI is still sitting within the 1501-1526 tight range. Nevertheless, as technical indicators are on the mend, we expect the benchmark to rebound towards 1526 (8 July high) and 1536 (mid BB) levels. A successful breakout above these hurdles will spur further upside to 1545-1556-1574 zones. Conversely, a decisive breakdown below 1500 will drag the index lower towards 1490-1474 levels.

MARKET OUTLOOK

On the back of aggressive vaccination rates (~13.9% of the nation's population are now fully inoculated with two doses vs 4.4% a month ago) and optimism that more states will move to Phase 2 of NRP as early as August, KLCI is expected to stage a relief rebound towards 1526-1536-1545 levels (supports 1490-1500) in this holiday-shortened week (Hari Raya Haji holiday 20 July), supported by bottoming up technical indicators. If the current pace persists, Malaysia is on track to achieve 40% and 70% of the population fully vaccinated with two doses by end Aug and Sep respectively, with an ultimate herd immunity goal of 80% by end-2021.

Source: Hong Leong Investment Bank Research - 19 Jul 2021