MARKET REVIEW

Global. Tracking the record-breaking Nasdaq and a rebound in oil prices, most Asian markets ended mildly higher, led by bargain-hunting interests on technology and O&G stocks on positive US vaccination news and fading concerns about an imminent change in Fed’s accommodative monetary stance during the Jackson Hole speech. Ahead of the Jackson Hole symposium (26-28 Aug), the Dow inched up 0.1% to 35406 whilst the S&P 500 (+0.2% to 4496) and the Nasdaq (+0.2% to 15042) ended at all-time closing highs, as sentiment was boosted by positive news on vaccination approvals, expectations that the Fed would not shock markets at Jackson Hole, and the House of Representatives approval of the USD3.5tn budget framework.

Malaysia. KLCI ended 16.4 pts to 1569.8 (4th consecutive gain), lifted by telco, plantation and utility stocks amid hopes of abated political risk and investors’ confidence in policy continuity (as ‘political ceasefire’ talks appear to have achieved a positive outcome), and further reopening of more economic sectors due to the recent vaccination ramp-up underpinned sentiment. In terms of fund flows, foreigners continued their strong net purchases for the 3rd straight day amounting to RM237m (5D: RM254m) whilst the local institutions and retailers logged net selling activities amounting to RM189m (5D: -RM195m) and RM48m (5D: -RM58m), respectively.

TECHNICAL OUTLOOK: KLCI

Following the successful breakout above 1534 and the downtrend line resistance from 1696, we reckon the benchmark could advance further towards 1580-1585 zones before profit taking activities emerge. On the flip, a sharp fall below 1556 and 1534 supports could signal a resumption of consolidation ahead with key supports pegged at 1500-1483 zones.

MARKET OUTLOOK

Driven by foreign funds buying (net buy RM397m in three days) in anticipation of easing political risk and confidence in policy continuity coupled with the reopening of more economic sectors amid promising progress in vaccinations, we feel the market’s risk to reward is now tilted to the upside with short term resistances upgraded to 1580-1585-1600 whilst supports are pegged at 1515-1534-1556 levels. Key events that may dictate further the KLCI direction are the impending announcement of DPM and cabinet team, as well as the Jackson Hole symposium for clues of the potential US tapering and timing of interest rates hikes.

Source: Hong Leong Investment Bank Research - 26 Aug 2021