MARKET REVIEW

Global. The MSCI Asia Ex-Japan fell for the 3rd consecutive days, sliding 2% to 642.5 amid nagging concerns surrounding regulatory clampdowns on tech, tutoring and property companies in China and the surging Delta variant Covid-19 cases before the US FOMC meeting outcome tomorrow. As investors await the Fed policy meeting outcome, the Dow skidded as much as 266 pts to 34878 as sentiment was clouded by Beijing’s crackdown and resurgence in Covid-19 cases, before reducing the losses to 85 pts at 35082 in anticipation of a flurry of strong quarterly earnings from the Fab 5 (i.e Apple, Microsoft, Alphabet, Facebook and Amazon) this week.

Malaysia. Despite recording the 2nd highest Covid-19 cases of 16117 yesterday, KLCI inched up 2.1 pts to 1514.6 after hovering within 1511.9-1517.4 band, as sentiment was boosted by the aggressive vaccination pace (daily vaccine doses administered reached another record high of 554k yesterday) and government’s optimism that most states will move into Phase 4 of the NRP by October at the earliest. In terms of fund flows, foreign investors and local institutions net sold RM52m (5D: -RM347m) and RM5m (5D: +RM143m) securities respectively, whilst retail investors (+RM57m; 5D: +RM204m) were the major net buyers.

TECHNICAL OUTLOOK: KLCI

Since the slide on 8 July, the KLCI is still gyrating within the 1501-1534 range bound mode. We expect the trend to continue until the index can stage a decisive breakout above the 1534 barrier. A successful clearance would lift the index toward 1545-1556-1580 zones. Conversely, failure to defend the 1500 psychological support would suggest the bears are in control again, implying more downside bias towards 1474-1490 levels.

MARKET OUTLOOK

Ahead of the FOMC outcome tomorrow and fears of further delay in economic reopening owing to the surging Covid-19 cases, KLCI is envisaged to maintain a sideways consolidation mode (gyrating within 1500-1534 levels). Nevertheless, we expect the benchmark to nudge higher towards 1534-1545-1556 levels in the next few weeks, underpinned by the ongoing aggressive vaccination rates (~18.1% of the nation's population are now fully inoculated with two doses) to achieve the targeted 40% and 70% goal by end Aug and Sep, as well as government’s optimism that most states will move into Phase 4 of the NRP by Nov at the earliest. Hence, we advocate a more balanced portfolio proposition with a lean towards recovery plays. These include MAYBANK, TENAGA, SUNWAY, MRDIY, TM, UWC, VS, ARMADA, MBM, SENTRAL and FOCUSP.

Source: Hong Leong Investment Bank Research - 28 Jul 2021