HLBank Research Highlights

Author: HLInvest   |   Latest post: Fri, 27 Nov 2020, 11:01 AM


Traders Brief - Extended MCO = Extended Consolidation

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Global: In line with the rebound on Wall Street and oil prices, coupled with expectations of more fiscal stimulus from Beijing to shore up the coronavirus-hit economy, most of the Asian markets ended higher; NIKKEI 225 (+1.5%), KOSPI (+1%) and SENSEX (+1.7%). Overnight, the Dow surged as much as 409 pts to 23885 following a massive rally in historic low oil prices and a mildly lower-than-expected weekly jobless claims before ended flat at 23515 (+39 pts) amid news that Gilead’s experimental antiviral drug for the coronavirus flopped in its first randomised clinical trial (which was later clarified that the document contained “inappropriate characterisations” and that the study’s findings were “inconclusive”). Meanwhile, Intel shares dropped post 1Q20 results as the strong earnings is not expected to last in 2Q.

Malaysia: Tracking higher regional markets and rebound in crude oil prices, KLCI jumped as much as 13.5 pts to 1395.3, but sharp profit taking in the afternoon ahead of the impending MCO announcement last night saw the index surrendered the entire gains to end 0.3 -pt lower at 1381.6. Trading volume reduced to 5.05bn shares worth RM2.58bn against Wednesday’s 5.10bn shares worth RM2.86bn. Market breadth was stable with with 461 gainers vs 374 losers (G/L ratio 1.23x) against 1.23 (Wednesday), 0.24x (Tuesday) and 1.16x (Monday).


In wake of the bearish trend reversal Gravestone Doji pattern after refilling the 1369-1419 gap on 20 Apr, KLCI slid 4.9% or 70 pts from a high of 1429 (20 Apr) to a low of 1359 (22 Apr) before settling at 1381.6 yesterday. As the MACD/RSI/Stochastic indicators are levelling off from their recent resistances, KLCI is likely to engage in a brief consolidations, with key support at 1359. Breaking this low would likely confirm that the bears are in control to push KLCI lower at 1337 (30D SMA) and 1304 (23.6% FR) zones. Conversely, only a successful breakout above 50D SMA or 1398 pts will lift index from current consolidation mode to revisit 1412 (50% FR) and 1429 before testing our LT target at 1460 (61.8% FR) levels.


Tracking positive bounce from the oversold crude oil prices and continuous drop in local active Covid-19 cases to 1966 (lowest since 27 Mar), KLCI may resume its upward momentum to retest the key SMA50 (1398) resistance. Breaking this hurdle would lift the index from sideways consolidation mode towards 1412-1429 territories. Nevertheless, the 3rd MCO extension (although widely anticipated) to 12 May could pose negative ramifications on the economy and corporate earnings in 2020, capping further meaningful recovery. Today, we believe trading interest will be seen within O&G stocks amid gains in crude oil prices, whilst technology stocks could witness continuous profit taking following a weak guidance by Intel.

Source: Hong Leong Investment Bank Research - 24 Apr 2020

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