MARKET REVIEW

Global. MSCI All Countries Asia Pacific Index inched up 0.3% to 162.1, cheered by China's decision to ease some quarantine requirements for international travellers and PBoC’s pledge to roll out more accommodative policies to support a heavily bruised economy from zero-Covid lockdowns. Ahead of the key core PCE price index and Powell’s speech tonight, the Dow skidded 491 pts to 30,497 (erasing early gains of 447 pts) amid a drop in consumer confidence to near decade low at 98.7 (consensus: 100; May: 103.2) overshadowed reopening optimism in China. Sentiment was also dampened hawkish comments by San Francisco and the New York Fed Presidents.

Malaysia. In anticipation of the 1H22 window dressing activities and the S&P's upgrade of Malaysia's sovereign rating outlook to stable from negative, KLCI rallied 16.6 pts to 1,454.7, led by bargain hunting on PPB, PMETAL, SIMEPLT, CIMB, MAYBANK, IOICORP and MRDIY. Total turnover narrowed to 2.29bn units valued at RM1.61bn from 2.65bn units worth RM1.43bn a day before. Market breadth (gainers/losers) continued to stay positive at 1.14 vs 1.5 previously. In a lacklustre session, retail investors (+RM12m, 5D: +RM110m; YTD: +RM1.50bn) and foreign institutions (+RM17m, 5D: -RM193m; YTD: +RM6.38bn) were key net buyers vis-à-vis net selling trades by local institutions (-RM29m; 5D: RM83m; YTD: -RM7.88bn).

TECHNICAL OUTLOOK: KLCI

After plunging 113 pts in five weeks, the bellwether benchmark staged a technical rebound for a 3rd straight day. We may see further oversold rebound this week in anticipation of 1H22 window dressing activities, supported by bottoming up technical indicators. However, further upside may be capped near stiff neckline resistances at 1,478-1,500 levels. Conversely, failure to hold at 1,428 (23 June low) support may trigger further selloff towards 1,400 levels.

MARKET OUTLOOK

We reckon KLCI to stay choppy albeit on upside bias in anticipation of the 1H22 window dressing activities. However, further upside may be capped near 1,478 -1,500 levels (supports: 1,400-1,428) due to lack of conviction by investors with light trading volumes amid prevalent headwinds such as (i) elevated inflation, (ii) potential capital outflows amid aggressive Fed, (iii) protracted Russia-Ukraine war, (iv) heightened US-China conflict, (v) political fluidity amid speculation of GE15 in 2H22 and (vi) the paucity of earnings and GDP growth in 2H22 following government’s recent subsidy rationalization measures.

Source: Hong Leong Investment Bank Research - 30 Jun 2022