MARKET REVIEW

Global. The MSCI Asia Ex-Japan rebounded 1.2% to 632.4 as investors bargain-hunted after tumbling 4.8% WoW. However, lingering worries about the highly transmissible Delta Covid-19 variant and regulatory tightening in China coupled with the Fed’s timeline for policy tightening capped further gains. The Dow rose for a 2nd day, rallying 216 pts to 35336 whilst the Nasdaq reached an all-time closing high (+228 pts to 14942) as sentiment was boosted by full FDA approval of Covid-19 vaccines developed by Pfizer and BioNTech in a move that could accelerate inoculations in the US. Meanwhile, investors grew less concerned that the Fed would soon begin changing its accommodative monetary stance ahead of the Jackson Hole symposium (26-28 Aug).

Malaysia. KLCI gained 4.3 pts to 1522.4 as the appointment of PM Sabri should help assuage investor’s concerns on policy continuity. Sentiment was also supported by falling new Covid-19 cases in the country to 17672 cases (from an all-time high of 23564) with almost 41% of the population has been fully vaccinated whilst the R-Naught slipped to almost 2-month low at 1.01 on 23 Aug. In terms of fund flows, local retailers logged net selling activities amounting to RM26m (5D: +RM62m) whilst local institutions and foreigners turned net buyers with total purchases valued at RM19m (5D: -RM69m) and RM7m (5D: +RM7m), respectively.

TECHNICAL OUTLOOK: KLCI

KLCI continued to consolidate upward from YTD low of 1483 (4 Aug) before ending at 1522.4 yesterday. As the political risk subsides, we reckon the benchmark could stage a long-awaited breakout from current range bound trade. A strong breakout above 1534 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

With abated political risk and investors’ confidence in policy continuity, we feel the market’s risk to reward is now tilted to the upside with short term resistances at 1534-1556 levels (supports: 1483-1500), pending the announcement of DPM and cabinet team and the Jackson Hole symposium for clues of the potential US taper tantrum

Source: Hong Leong Investment Bank Research - 24 Aug 2021