MARKET REVIEW

Global. Ahead of a week packed with the major US and Chinese economic data, Asian markets ended mixed following news of a fresh regulatory crackdown on Chinese tech giants, worries about the resilience of the global economic recovery amid a resurgence in Covid-19 cases, and the timing of tapering by the Fed. Ahead of the US Aug CPI data tonight, which will give a broad picture of the country's inflation wave ahead of the FOMC meeting on 21-22 Sep, the Dow staged a 262-pt technical rebound to 34869 after diving 836 pts in five days.

Malaysia. KLCI retreated as much as 14 pts to 1562 due to the extreme overbought conditions sparked by the recent rally from a YTD low of 1483, with selldown in TOGLOV, HARTA, PMETAL, GENTING and GENM. However, the signing of political corporation MOU between the government and PH and declining Covid-19 cases to 16073 (lowest in 42 days) helped to pare down the index losses to -5.8 pts at 1570.1. In terms of fund flows, foreign institutions and local retailers were the major buyers amounting to RM58m (5D: RM419m) and RM64m (5D: RM331m) respectively whilst local institutions logged net selling amounting to RM122m, its 14th consecutive day of net outflow (5D: -RM750m).

TECHNICAL OUTLOOK: KLCI

Following the positive Hammer candlestick formation, KLCI is in the midst of forming a base near 1550-1560 zones. A conclusive breakdown below these supports would trigger further selldown towards 1533 (23.6% FR) zones. The topside should see the 200d SMA or 1583 as the immediate barrier followed by the 1600-1605 territory. In a nutshell, KLCI’s near term trend would remain choppy, oscillating in between 1550 and 1600 range.

MARKET OUTLOOK

In this holiday-shortened week (Malaysia Day holiday: 16 Sep), KLCI (YTD: -3.5% YTD; 14.6x CY22 P/E) is expected to lock in a consolidation mode after rallying from 1483 YTD low, on the back of rising risk aversion over the potential economic slowdown in the US and China, coupled with the Fed’s tapering timeline. However, Bursa Malaysia is expected to hold up (supports: 1550-1564) as market risk appetite resurfaced on hopes of easing political risks and confidence in policy continuity, economic reopening gaining tractions (as ~54% of the total population has been fully vaccinated), underpinned by the sustained influx of foreign funds (+RM1.81bn since end July). Key events to monitor are the upcoming FOMC meeting (22 Sep), 12MP (27 Sep) announcement and 2022 Budget (29 Oct).

Source: Hong Leong Investment Bank Research - 14 Sept 2021