MARKET REVIEW

Global. Ahead of the US July jobs report, Asian markets ended mixed amid concerns over China’s tightening clampdowns on areas from anti-monopoly practices, cyber-security, and data security. Meanwhile, the surging Covid-19 Delta variant outbreaks in China also fuelled concern about its uneven economic recovery outlook. The Dow closed at record high last Friday (+144 pts to 35208) following a stronger-than-expected July jobs report and a robust 2Q21 results season (so far the S&P 500 companies’ earnings grew >90% YoY and >80% beat expectations), shrugging off concerns over the Delta variant. Besides, the strong jobs report supported investor expectations that the Fed could begin to trim its bond purchases by year-end, boosting the US 10Y yields by 0.07% to 1.30%.

Malaysia. KLCI ended 6 pts lower to 1489.8, pulled down by retracements on selected heavyweights such as TOPGLOV, MAYBANK, TENAGA, HARTA, DIGI and MISC, on the back of the fluid domestic politics and elevated new daily Covid-19 cases. In terms of fund flows, foreign investors were the major net sellers amounting to RM133m last Friday whilst retail investors and local institutions net bought shares totalling RM68m and RM65m, respectively. WoW, foreign investors’ net outflow reduced 22% to RM451m while domestic institutions and retail investors logged net buying activities amounting to RM121m (RM321 previously) and RM330m (RM259m previously), respectively.

TECHNICAL OUTLOOK: KLCI

There is no change to our near term negative view on the KLCI as it is still trapped within our envisaged 1474-1534 trading band. In the short term, the odds will continue to favour the bears, unless the index can remove the 1510-1534 barriers successfully. A strong breakout above these hurdles would lift the benchmark out of the range bound consolidation mode, advancing further toward 1545-1556-1573 zones.

MARKET OUTLOOK

Without any meaningful catalysts, we opine that the odds will continue to favour the bears and any oversold rebound is likely to be short-lived, capping at 1500-1510-1534 resistance levels amid local political stalemate, unwavering new daily Covid-19 cases and the upcoming August reporting season. Nevertheless, downside risks may be cushioned at 1452-1474 zones, given the aggressive vaccination rates (fully vaccinated) 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.

Meanwhile, PM’s announcement on the relaxation of MCO measures (effective 10 Aug) for individuals who are fully vaccinated are allowed to eat out in states that have moved to Phase 2 of the NRP should bode well for an ultimate recovery for the consumer & retail sector. HLIB has BUY ratings on BJFOOD (TP: RM 2.48), FOCUSP (TP: RM 1.05) and MRDIY (TP: RM 4.79).

Source: Hong Leong Investment Bank Research - 9 Aug 2021