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HLBank Research Highlights

Author: HLInvest   |   Latest post: Tue, 24 Nov 2020, 10:32 AM

 

Traders Brief - Trading Activities Should Tone Down Ahead of An Extended Hari Raya Holidays

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MARKET REVIEW

Global: Asian bourses ended mixed due to fears of worsening US-China ties after Trump again blamed China over the origin of the COVID-19 outbreak and saying he has no interest in speaking to President Xi right now and threatened to even cut ties with Beijing. Last Friday, the Dow inched up 60 pts at 23685 (still plunged 646 pts WoW) after swinging between gains and losses. Sentiment was cautious as investors weighed worries about a bruising US-China trade turmoil (as the White House moved to block shipments of semiconductors to Huawei) and a grim U.S Apr retail sales. However, growing optimism of a varying degrees of easing lockdowns and expectations of another coronavirus relief bills by Democrat boosted sentiment.

Malaysia: In line with higher Wall St and oil prices, KLCI gained 6.2 pts to 1403.4 (+21.1 pts WoW) after lingering within 1398.7-1408.2 band. Trading volume increased to 9.23bn shares worth RM3.87bn as compared to Thursday’s 7.01bn shares worth RM4.04bn, dominated by COVID-19 winners of gloves and healthcare-related companies as well as lower liners. Market breadth was positive with 592 gainers as compared to 316 losers.

TECHNICAL OUTLOOK: KLCI

In the last four weeks, KLCI was able to establish a solid supports near 1359-1367 levels, providing a good platform for further traction towards double resistances at 1418 (18 Apr) and 1429 (20 Apr) levels. Breaking these hurdles would lift KLCI to test the formidable resistance at 1462 (100D SMA) zones. Conversely, violating the supports at 1387 (20D SMA) and 1375 (30D SMA) could put the bears in the driving seat again, heading towards 1359 (22 Apr low) and 1344 (38.2% FR) levels. Both the MACD and RSI are flattening whilst the slow stochastic indicator is on uptrend, signalling potential upside bias in a sideways consolidation pattern.

MARKET OUTLOOK

The Parliament resitting today is likely to be a non-event as the agenda only entails a speech by the King. As the daily and weekly technicals are on the mend, KLCI could rise further but upside could be capped at 1418-1429 zones, as market is digesting last week historic trading volumes and ahead of the extended Hari Raya holidays (Bursa will be closed on 25-26 May). Meanwhile, active trading interests could be seen on HSR-related counters (eg ECONBHD, GBGAQRS, GADANG, HSSEB) amid news of the HSR to be revived soon (source: The Edge Malaysia). Also, the bullish inverted Head & Shoulder pattern on Brent oil prices in anticipation of rising demand as the global economy emerges from lockdowns could ignite trading interests on oil & gas related stocks (eg HIBISCUS, DIALOG, MHB, DAYANG, VELESTO, UZMA, CARIMIN, SERBADK).

Source: Hong Leong Investment Bank Research - 18 May 2020

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ECONBHD 0.445 -0.015 (3.26%) 4,683,200 
GBGAQRS 0.655 -0.035 (5.07%) 1,776,000 
GADANG 0.40 -0.01 (2.44%) 1,929,100 
HSSEB 0.465 -0.025 (5.10%) 658,100 
HIBISCS 0.59 +0.005 (0.85%) 67,874,700 
DIALOG 3.70 -0.06 (1.60%) 7,382,100 
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DAYANG 1.03 -0.01 (0.96%) 25,021,000 
VELESTO 0.135 0.00 (0.00%) 47,857,000 
UZMA 0.505 -0.01 (1.94%) 13,663,500 
CARIMIN 0.61 0.00 (0.00%) 9,717,600 
SERBADK 1.70 0.00 (0.00%) 11,853,500 
MEDIA 0.18 -0.005 (2.70%) 6,571,000 
MUDAJYA 0.275 -0.015 (5.17%) 1,799,900 
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foo Small and mid-cap stocks offer better value at the moment, says RHB
May 15, 2020
KUALA LUMPUR: Small and mid-cap stocks offer better value at the moment given that their large-cap peers have staged solid rebounds off their March lows, RHB Investment Bank Bhd (RHB IB) said.
Shares of small-cap companies had lagged behind in staging strong recovery rebounds from Bursa Malaysia's March 18 dip, the bank said.
RHB IB chief executive officer Robert Huray said alpha hunting remained a daunting task for most investors against the backdrop of heightened uncertainties in light of Covid-19.
This was given the fact that Bursa's key index FBMKLCI had rallied vigorously, narrowing its year-to-date (YTD) losses to 13 per cent.
This had ultimately raised the question of further upside potential for big liquid stocks, Hurray said at the virtual launch of RHB Top 20 Malaysia Small Cap Jewels 2020 (RHB Top 20) book here today,
He said the small-mid cap space had offered investors a 27 per cent gain versus a -4.4 per cent for FBMKLCI last year.
The segment, though, is still off from its peak by a much wider margin, down 23 per cent YTD.
"With the fate of many bigger companies tied to waning external demand, low commodity prices and dwindling capacity to spend locally, chances of finding winners in the new norm post Covid-19 will be higher for smaller and nimbler companies that can better capitalise on emerging opportunities," Huray said.
RHB Top 20 features 20 names for investors to consider during this challenging period in the wake of the Covid-19 pandemic.
Hurray said its top 20 firms had collectively outperformed the FBM KLCI and the FBM Small Cap Index with a holding period return of 20 per cent since the book's launch last May.
RHB IB head of regional equity research Alexander Chia said it had begun to see value in the market in a longer-term perspective, despite the elevated risk environment as the result of Covid-19.
"We believe the launch of the book is well-timed as we are seeing strong demand for alpha rich small-mid caps stocks that are resilient and can survive the on-going turmoil," Chia added.
In this year's book, the largest stock by market cap, at RM1.7 billion, is Mi Technovation, while the smallest is Advancecon Holdings Bhd at RM122 million.
Of the top 20 "jewels", 65 per cent have a market cap of less than RM500 million.
The trailing median price-to-earnings-ratio and return on equity of this year's pick are 12.6 times and 11.7 per cent respectively.
The RHB Top 20 forms part of the larger RHB Regional Small Cap Compendium that annually lists stock investment ideas from RHB IB's research teams in Malaysia, Indonesia, Singapore and Thailand.
RHB IB said companies in this year's book have market capitalisation of below RM2 billion, from 10 different industry segments with the biggest representation coming from the technology and industrial products and services sectors.
The screening process took into consideration the companies' spread and size, managements' credibility, industry fundamentals, earnings growth potential, industry track record and its level of corporate governance.
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