MARKET REVIEW

Global. Asian markets ended mixed as investors continued to weigh Beijing’s sweeping regulatory overhaul against technology, tutoring and property companies and the surging Delta variant Covid-19 cases before the US FOMC meeting outcome this morning. The Nasdaq jumped 0.7% to 14762, boosted by upbeat earnings and guidance from megacap stocks (excluding Apple and FB) whilst the Dow slipped 0.4% to 34 930 after the Fed kept its monetary policy measures steady, and signalled that it would begin to monitor progress toward its threshold to begin tapering monthly bond purchases at upcoming meetings .

Malaysia. KLCI ended flat (+0.8-pt to 1515.4) after hovering within 1509.8-1516.4 band, as sentiment continued to be bogged down by domestic fluid politics and elevated Covid-19 cases (hit another new high at 17405) yesterday. Trading volume fell to 3.7bn (4.4bn previously) valued at RM2.2bn (RM2.7bn previously) while market breadth was negative with 508 losers beat 411 gainers. In terms of fund flows, local 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 trapped 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 odds would continue to favour the bears, implying downside bias towards 1474-1490 levels.

MARKET OUTLOOK

Lingering concerns over the precarious local Covid-19 situation and domestic fluid politics should see KLCI extend its consolidation (gyrating within 1500-1534 levels) in the near term. Nevertheless, we expect the index to nudge higher towards 1545-1556-1580 levels in the next few weeks, underpinned by the ongoing aggressive vaccination rates (~18.7% of the nation's population are now fully inoculated with two doses) to achieve the targeted 40% and 70% goals by end of Aug and Sep, as well as government’s optimism that most states will move into Phase 4 of the NRP by Oct-Nov. 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 - 29 Jul 2021