MARKET REVIEW

Global. Asian markets ended mixed as investors weighed growing concerns of hawkish monetary policy tone by global central banks and heightened recessionary fears coupled with the Covid flare-ups in parts of eastern China could hurt a nascent recovery from a bruising lockdowns. Overnight, Wall St was closed due to the Independence Day holiday. Last Friday, Dow surged 322 pts but still ended 1.3% lower WoW at 31,097 as investors assessed the recent weak economic data and a poor 2H outlook guidance by Micron and Kohl's. Key US events to look out for this week are June ISM services index (6 July), June FOMC minutes (7 July), and the June jobs report (8 July).

Malaysia. In sync with a mixed regional markets and persistent foreign selling, KLCI fell 12.2 pts to 1,437.5 amid a confluence of internal and external headwinds. Market breadth (gainers/losers) deteriorated to 0.33 vs 0.63 last Friday. Foreign institutions continued their selling spree (-RM79m, 5D: -RM367m, YTD: +RM5.99bn) vis-à-vis net buying trades by local institutions (+RM50m, 5D: +RM245m; YTD: -RM7.61bn) and retailers (+RM29m, 5D: +RM122m; YTD: +RM1.61bn).

TECHNICAL OUTLOOK: KLCI

The KLCI resumed its downtrend yesterday (-12.2 pts to 1,437.5), erasing almost entirely last week’s 13-pt gain. The breakdown below 10D MA (1.443) and the long black candlestick could drag the benchmark to retest 1,428 (2Y low), with lower supports at 1,384-1,400 levels. Stiff resistances are situated at We expect KLCI to trend sideways in the near term with key neckline resistance at 1,476. Conversely, failure to hold at 1,428 may trigger further slump to towards 1,383-1,400 levels.

MARKET OUTLOOK

We expect KLCI to stay in consolidation mode in July (supports: 1,383-1,400-1,428; resistances: 1,460-1,478-1,500) due 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 overhang amid speculation of GE15 in 2H22, (vi) looming US recession and (vii) the paucity of earnings and GDP growth in 2H22 following government’s recent subsidy rationalization measures and foreign labour shortages.

Source: Hong Leong Investment Bank Research - 5 Jul 2022