MARKET REVIEW

Global. Asian markets ended higher as investors viewed a phone call between President Biden and China's premier Xi as a potential precursor to easing strained relations. However, the upside was capped ahead of the key US Aug PPI data and China’s regulatory crackdown. Overnight, the Dow jumped as much as 225 pts to 35104 as news of the 90- minute Xi-Biden phone call signalled positive sign amid fraught ties. Nevertheless, the benchmarked plunged 497 pts from the dally peak to end -271 pts at 34607, weighed down by the solid Aug PPI report and a 3.3% slide in Apple amid an unfavourable court ruling related to its app store.

Malaysia. Bucking higher regional markets, KLCI continued its profit taking pullback (-2.9 pts to 1575.9), led by sell down in SIME, IOICORP and PCHEM. However, market breadth turned slightly positive as 498 winners led 467 losers, with a total of 4.4bn shares worth RM2.7bn were traded amid strong performance from the energy sector. In terms of fund flows, after net sold RM63m on 9 Sep, foreigners’ resumed buying amounting to RM81m (5D: RM433m) whilst local institution’s selling momentum amounting to RM133m (13th

consecutive days of net selling; 5D: -RM712m). On the other hand, local retailer net bought RM52m (5D: RM279m) to record its 8th consecutive days of net purchase.

TECHNICAL OUTLOOK: KLCI

KLCI closed 2.92pts lower to end at 1575.9 last Friday, falling 13.3 pts WoW. On the back of weakening technical oscillators after sliding 29.1 pts from recent 1605 peak and closing below the key 200D SMA (now at 1583), KLCI is expected to witness further healthy pullback after surging from YTD low at 1483. Major supports are situated at 1550-1564 territory whilst upside resistance is restricted at 1583-1605 zones.

MARKET OUTLOOK

Despite intermittent profit-taking pullback after rallying from YTD low 1483 (weekly supports: 1550-1564; resistances: 1583-1605) and rising risk aversion over a slowdown in the US recovery from the renewed surge of Covid-19 Delta variant cases and Fed’s tapering timeline, Bursa Malaysia is expected to hold up as market risk appetite resurfaced amid hopes of easing political risks and confidence in policy continuity, economic reopening gaining tractions (as ~53% of the total population has been fully vaccinated), coupled with sustained influx of foreign funds (+RM1.75bn since end July; KLCI: -3% YTD; 14.6x CY22E P/E). Key events to look out in the next few weeks are the upcoming FOMC meeting (22 Sep), 12MP (27 Sep) announcement and 2022 Budget (29 Oct). Our top picks have a recovery tilt –Maybank, Tenaga, Bursa (broad based recovery), UWC, VSI, MBM (capacity recovery), MRDIY and FocusP (consumer sentiment recovery). As a balancer we also include defensives (TM, Sentral) and value picks (Armada, Sunway).

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of the market uncertainty, we took profit on SCOMNET (14.6% gain) after hitting our LT objective at RM1.65 on 10 Sep.

Source: Hong Leong Investment Bank Research - 13 Sept 2021