MARKET REVIEW

Global. Last Friday, Asian markets were mixed as investors geared up for the key US Aug jobs data for further clues on the Fed’s asset tapering timeline. Sentiment was also dampened by a private survey which showed activity in China’s services sector slumped into sharp contraction in August. The Nasdaq ended Friday at a new peak (+0.2% to 15363) but the Dow (-0.2% to 35369) and S&P (-0.03% to 4535) fell, reflecting the mixed sentiment stemming from a disappointing US Aug jobs report (+235k vs consensus +700k), raising fears about the pace of economic recovery amid the delta-fuelled Covid-19 resurgence.

Malaysia. After falling from a 5M high of 1605 (1 Sep) to a low of 1580 (3 Sep), KLCI staged a technical rebound to end 7 pts at 1589.2 last Friday, led by late buying on telcos, banks O&G as well as plantation counters amid a sustained influx of foreign funds due to reallocation of funds into ASEAN markets from China/Hong Kong as China government imposed multi-pronged crackdowns on a broad range of industries. Market breadth stayed positive as 631 gainers outnumbered 399 losers, with a total of 4.2bn shares worth RM2.8bn were traded. In terms of fund flows, foreigners’ buying momentum rebounded strongly to RM149m (5D: RM1.04bn) while the retailers turned net buyers for a 3rd day amounting to RM24m (5D: RM69m). On the other hand, local institutions’ net selling pace expanded to RM173m (5D: -RM1.11bn).

TECHNICAL OUTLOOK: KLCI

After surging 100.4 pts in the last 3 weeks, KLCI eased 1-pt WoW to 1589.2 last Friday. Despite KLCI’s late buying spurt last Friday, the benchmark is still looking stretched at the moment and a healthy consolidation may last for the next few trading days. Topside, stiff resistances are situated at 1605-1623 levels whilst downside supports are pegged at 1570- 1580 zones.

MARKET OUTLOOK

Despite a sharp rally (7.1% since 1483 low on 4 Aug), the local market is still underperforming most of its Asian on YTD basis (-2.3%), making Bursa Malaysia an even more compelling recovery play for the remainder of 2021. The optimism is reflected by the sustained influx of foreign funds (+RM1.4bn since end July) amid hopes of easing political risks and confidence in policy continuity, with Covid-19 vaccinations progressing well (R Naught fell to 0.95 on 4 Sep from recent peak of 1.16 on 28 July) and the economy is slated for full reopening by Nov. With domestic institutional funds still remain net sellers (-RM1.7bn since end July), further external inflows could see KLCI rerate higher if locals funds are forced to play catch up. Expect investors to continue to focus on large caps and cyclicals to position for a recovery scenario. Key events to look out are t he MPC meeting (on 9 Sep), FOMC meeting (22 Sep) imminent announcement of the 12MP (27 Sep) and 2022 Budget (29 Oct).

Source: Hong Leong Investment Bank Research - 6 Sept 2021