MARKET REVIEW

Global. Tracking an overnight 0.8% fall on Dow, Asian markets ended mixed as recent gloomy China economic data and intensified regulatory tightening on selected industries, surging new Covid-19 Delta cases and lingering concerns over the Fed timetable for asset tapering and interest rate hikes weighed on investor sentiment. The Dow slid 1.1% or 382 pts to 34960 after meeting minutes showed the Fed started eyeing tapering before the year-end. Sentiment was also dampened by the ongoing spread of the COVID-19 Delta variant, recent disappointing economic data, and a series of China crackdowns on the technology sector.

Malaysia. After a 20.7-pt relief rally on 17 Aug, KLCI inched up 1.7 pts to 1525.2 as investors remained sidelines ahead of the new PM announcement by Agong (likely by this week), while new Covid-19 cases in the country hit another fresh record high at 22242 cases. In terms of fund flows, foreign institutions logged net inflows for the 4th consecutive sessions amounting to RM32m (5D: +RM155m), followed by local retailers (+RM20m; 5D: +RM17m) whilst local institutions emerged as net sellers with RM52m (5D: -RM172m) in equities.

TECHNICAL OUTLOOK: KLCI

Following the strong reclaim above 1515 levels, we are turning mildly positive on the index to grind higher towards 1534-1556 levels in anticipation of an eventual resolution of political stalemate soon, supported by bullish technical indicators. Closing below 1515 may signal an further consolidation with key supports pegged at 1500-1483-1474 zones.

MARKET OUTLOOK

KLCI may consolidate its recent gains after rallying from 1483 (4 Aug low) to 1525 yesterday, pending a new PM announcement (likely by this week). We reiterate our view of limited downside to the already-depressed KLCI (trading at ~13.5x 2021 P/E vs 10Y average 17x) amid low foreign ownership (a historic low of 20.2% as of July) and expectations of a more meaningful recovery in 4Q21 when Malaysia crosses the vaccination herd immunity (expected to achieve the 80% threshold of the adult population being fully vaccinated by Oct21). Short term supports are situated at 1483-1500 whilst resistances are pegged at 1534-1556 levels.

Source: Hong Leong Investment Bank Research - 19 Aug 2021