MARKET REVIEW

Global. Asian markets slid last Friday amid lingering concerns over China’s tightening grip over a range of industries and the resurgence of highly transmissible Covid-19 delta variant on the recovery, overshadowed easing worries that the Fed may scale back its ultraaccommodative in the short term. The Dow fell 149 pts to 34935 (-125 pts WoW) as sentiment was soured by megacap tech stocks after Amazon’s 2Q21 results missed estimates and offered weaker-than-expected guidance, as well as fresh underlying fears about a slowdown of the reopenings due to rising Covid-19 Delta cases.

Malaysia. In line with sluggish regional markets, KLCI tumbled 18.3 pts to 1494.6 (-28.8 pts WoW and -38 pts MoM), as sentiment was continued to be hampered by elevated local Covid-19 cases and heightened political tension after recent fiasco in Parliament. Market breadth continued to stay below 1 for the 5 th straight day with 665 losers beat 300 gainers. WoW, the daily trading value averaged RM2.7bn versus the previous week’s RM3.2bn. In terms of fund flows, foreign investors remained net sellers amounting net weekly outflows of RM580m (after recorded the highest net selling in 4 months totaling RM325m last Friday) as domestic institutions and local retail investors logged net buying activities (amounting to RM321m and RM259m, respectively).

TECHNICAL OUTLOOK: KLCI

Following the 1500 breakdown last Friday to 1494 (-28.8 pts WoW), KLCI outlook has tuned increasingly negative with the odds continue to favour the bears in the immediate term targeting 1452-1474 territory. On the upside, key resistances are 1500-1510-1534 levels. Only a successful clearance would lift the benchmark out of the range bound consoldiaiton mode to retest 1545-1556-1573 zones.

MARKET OUTLOOK

After plunging 28.8 pts WoW and 38 pts in July, KLCI could witness a mild rebound this week (special Parliament sitting has been adjourned until further notice) with stiff resistances at 1500-1510-1534 levels amid local fluid politics, elevated Covid-19 cases and the upcoming August reporting season. Nevertheless, downside risks are likely to be cushioned at 1452-1474-1490 zones, given the aggressive vaccination rates to achieve the targeted 40% and 70% goals by end of Aug and Sep, as well as the government’s optimism that most states will move into Phase 4 of the NRP by Nov. 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 - 2 Aug 2021