MARKET REVIEW

Global. Tracking overnight rally in Wall St, Asian markets staged a technical rebound from 19 July’s slide, as worries of spiking COVID-19 cases and resultant restrictive measures subsided amid optimism of a constructive global economic expansion, robust corporate earnings, and accommodative central banks policies. Riding on the renewed optimism about the US economic recovery, the Dow jumped 286 pts to 34798 (rebounded 3.1% from the low of 33742 on 19 July rout) after a generally strong barrage of corporate earnings and positive guidance overshadowed the fear of economic slowdown due to the COVID-19 Delta variant.

Malaysia. KLCI eased 3.5 pts to 1516.5, extending its sideways consolidation for the 9th

session since the 8 July’s slump, in the wake of a weak sentiment amid the elevated Covid- 19 cases and sluggish Ringgit (slid 5.29% YTD vs USD). Both retailers and local institutions logged net buying flows of RM15m (5D: +RM116m) and RM132m (5D: +RM93m) respectively while net selling by foreign investors returned (-RM147m; 5D: -RM209m).

TECHNICAL OUTLOOK: KLCI

Following the slide on 8 July, the KLCI is still sitting within the 1501-1534 range bound mode. The trend may continue for a while until the benchmark can stage a decisive breakout above the 1534 barrier. A successful breakout above this barrier will spur further upside to 1545-1556-1579 zones. Conversely, failure to clinch a support at 1500 would suggest that the bears are weak at the moment and more weakness may follow in the days to come as the longer term downtrend resumes.

MARKET OUTLOOK

With R-Naught has reverted back to 1.09 (YTD peak: 1.20), aggressive vaccination rates (~15.1% of the nation's population are now fully inoculated with two doses, on track to achieve the targeted 40% and 70% goal by end Aug and Sep) and optimism that more states will move to Phase 2 of NRP in August, we remain optimistic that KLCI would eventually regain its upward momentum towards 1534-1545-1556 levels (supports 1490- 1500), supported by bottoming up technical indicators. On stocks’ selection, the renewed weakness in Ringgit (slid 5.3% YTD to 4.23 vs USD) may trigger some buying interests on export-oriented stocks in the technology (UWC, FRONTKN, UCHI, VS, INARI), glove (TOPGLOV, HARTA, KOSSAN, SUPERMX), woodbased (EVERGRN, HEVEA, HOMERIZ, FLBHD, LIIHEN), PLANTATION (TAANN, TSH, HSPLANT) and packaging (BPPLAS, TGUAN, SLP, DAIBOCI) industries.

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of the heightened market volatility, we took profit on ATAIMS (4.2% gain) on 21 July.

Source: Hong Leong Investment Bank Research - 22 Jul 2021