MARKET REVIEW

Global. Tracking higher Wall Street following the Senate’s approval of the USD1 trillion infrastructure bill, Asian markets ended mostly higher amid bargain hunting on battered stocks owing to recent China’s regulatory crackdown, overshadowed worries about surging Covid-19 cases. Overnight, the Dow (+0.6% to 35485) and the S&P (+0.3% to 4448) ended at another record levels, as data indicated US inflation growth may have peaked, and lawmakers on Capitol Hill continue to make progress on plans to boost infrastructure spending.

Malaysia. The KLCI soared as much as 17.8 pts to 1514.5 pts following the Senate’s approval of the USD1 trillion infrastructure bill and recent announcement on SOP relaxation for fully vaccinated individuals. However, the early gains were reduced to 7.7 pts at 1504.4 amid caution over local political development after news emerged stating that a vote of no confidence may be called next week. In terms of fund flows, after net sold in the last 12th consecutive sessions, foreign investors turned net buyers amounting to RM31m shares whilst local institutions and retailers emerged as net sellers totalling RM26m and RM5m, respectively.

TECHNICAL OUTLOOK: KLCI

Following the hammer candlestick pattern on 4 Aug, KLCI staged a rebound from a low of 1483 to a high of 1515 before easing to end at 1504.4 yesterday. The inverted Hammer formation signalled further uptrend could be affected due to local domestic headwinds. We reiterate that the odds would still 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

Although recent announcements of a gradual reopening and relaxation for fully vaccinated individuals signal an inflection point towards economic recovery, we opine that the market would remain choppy (short term stiff resistances situated at 1510-1534 territory) amid prevailing speed bumps i.e. local political stalemate, elevated daily Covid-19 cases and the upcoming August reporting season. Having said that, a recovery scenario remains encouraging (key downside supports: 1452-1474), 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.

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of the market uncertainty, we decided to square off TSH (1% gain), DAYANG (3.8% gain) and HARBOUR (6.7% gain) on 11 Aug.

Source: Hong Leong Investment Bank Research - 12 Aug 2021