KUALA LUMPUR: Sell-off in the benchmark index, FTSE Bursa Malaysia KLCI (FBM KLCI), is likely to continue in July as investors continue to weigh the impact of diesel subsidy rationalisation plan and rising political heat.
The FBM KLCI was up almost six points earlier to 1,596.04 points.
Hong Leong Investment Bank Bhd (HLIB Research) said an announcement from Dewan Rakyat speaker Tan Sri Johari Abdul, within the next three weeks, on the vacancy of six Bersatu members of parliament seats and by-elections, is likely to impact sentiment on the key index.
The US Federal Reserve (Fed's) rate-cut trajectory for the second half of this year will also influence investors' appetite for heavyweights.
HLIB Research in its note said, given the FBM KLCI's strong outing in the first half of 2024 and ongoing foreign selling , a further consolidation with support at 1,562-1,575-1,580 range is likely.
The FBM KLCI added 135 points or 9.3 per cent in the first half of the year. Year-to-date foreign investors have net sold RM828 million.
It does not discount an oversold rebound to between the 1,605 and 1,632 range however, in a seasonally positive month of July.
Resilient corporate earnings and economic growth, along with influx of planned investments is expected to fuel this.
HLIB Research added that the rebound might be supported by the government's reforms aimed at long-term economic and fiscal improvement.
Furthermore, HLIB sees exuberance in investment themes surrounding tourism recovery, energy transition, Johor's reinvigoration, disposable income boosters (following the introduction of the EPF Account 3 and pay rise for civil servants), as well as trade diversion or China+1 strategy.
"After losing 52 pts from year to day high of 1,632 (May 23) to a low of 1,580 zones (lower downtrend channel) in the last five sessions, we see further rebound from here towards major hurdles at 1,600 to 1,607 (50-day moving average) zones. "A successful breakout above the said barriers may lift the index towards 1,605-1,632 zones," the research firm said.