MARKET REVIEW

Global. Tracking further slump on Dow, Asian markets ended lower as the July Fed minutes signalled tapering talk. Meanwhile, spiking Covid-19 Delta cases and recent soft economic data from the US and China also weighed on investor sentiment as investors grapple with the growth outlook. The Dow slid as much as 271 pts to 34690 before mitigating the losses to 66 pts at 34894 as strength in tech helped lift investor sentiment a day after the July Fed minutes signalled bond tapering by year-end. Sentiment was also dampened by the sliding oil prices amid nagging fears of weak demand amid a worsening pandemic and a rising greenback.

Malaysia. Tracking sluggish Asian markets, KLCI slid 10.3 pts at 1515 yesterday on profit taking after rallying from 1483 (4 Aug low) to a high of 1526 (18 Aug). Market breadth was negative (634 losers vs 334 gainers) as investors await the official confirmation of the next PM and its new cabinet team while new Covid-19 cases in the country also hit another fresh record high at 22948 cases. In terms of fund flows, foreign institutions logged its 1st outflow (-RM120m; 5D: RM61m) after four consecutive sessions of net buy whilst local institutions (+RM71m; 5D: -RM140m) and local retailers (+RM49m; 5D: +RM79m) emerged as net buyers in equities.

TECHNICAL OUTLOOK: KLCI

After staging an oversold rebound from 1483 (4 Aug) to a high of 1526 (18 Aug), KLCI retreated 10.3 pts to end at 1515 yesterday. More sideways trade is anticipated as investors await the announcement of the next PM, before stocks can breakout from current range bound trade. A strong breakout above will spur more upside towards 1556-1579 zones whilst a retracement below 1511 (30D SMA) may signal further consolidation ahead with key supports pegged at 1500-1483-1474 zones.

MARKET OUTLOOK

We expect KLCI to trend range bound (supports: 1483-1500; resistances: 1534-1556 levels) in the near term after rallying from 1483 (4 Aug low) to a high of 1526 (18 Aug) before closing at 1515 yesterday, as investors await the official confirmation of the next PM and its new cabinet team. We reiterate our view of limited downside to the alreadydepressed 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).

Source: Hong Leong Investment Bank Research - 20 Aug 2021