MARKET REVIEW

Global. Asian markets ended firmer on technical rebound following dovish signals from the Fed and Beijing’s move to calm investor nerves over mounting regulatory risks. Overnight, the Dow surged as much as 241 pts to an all-time high at 35171 before reducing the gains to 153 pts at 35084, underpinned by Fed’s accommodative stance, a raft of solid company results and a constructive US 2Q21 GDP that consumer spending was strong even as overall growth trailed expectations. Meanwhile, Amazon fell in extended trading after its sales forecast fell short, pulling the Nasdaq 100 futures 1% lower at the time of writing.

Malaysia. Bucking a rebound in regional bourses, KLCI slipped 2.6 pts to 1512.9, as sentiment was dampened by elevated local Covid-19 cases and rising political tension after the Royal reprimanded the PN government for its handling of the emergency ordinances and unconstitutional conduct. Market breadth continued to stay below 1 for the 4th straight day with 636 losers beat 350 gainers. In terms of fund flows, foreign and local institutions net sold RM25m (5D: -RM296m) and RM8m (5D: +RM75m) securities respectively, whilst retail investors (+RM33m; 5D: +RM221m) were the major net buyers.

TECHNICAL OUTLOOK: KLCI

Since the slide on 8 July, the KLCI is still trapped within the 1501-1534 levels. We expect the range bound mode to continue unless the index can stage a decisive breakout above the 1534 barrier. A successful clearance would spur the index toward 1545-1556-1580 zones. Conversely, failure to defend the 1500 levels would imply that more downside bias for the KLCI toward 1474-1490 territory.

MARKET OUTLOOK

Lingering concerns over the local political scene and the Covid-19 situation should see KLCI extending 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, given the aggressive vaccination rates 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.

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of the market uncertainty, we decided to square off LAGENDA (3.1% gain) and MAYBULK (0% gain) on 29 July

Source: Hong Leong Investment Bank Research - 30 Jul 2021