HLBank Research Highlights

Author: HLInvest   |   Latest post: Fri, 23 Oct 2020, 9:12 AM


Traders Brief - Upside Bias But Facing Stiff Rounding Top Resistances at 1591-1618 Levels

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Global: Tracking higher Wall St, Asian markets were mildy higher as investors weighed on the crucial US-China phase 1 trade talk review this weekend and impasse in the US pandemic relief negotiations. Overnight, the Dow lost 80 pts to 27896, as investors mulled the stalemate in stimulus talks and a drop in weekly jobless claims. Apple (+1.8% to USD460 on news the tech giant is set to launch a range of service bundles in October) kept the Nasdaq 30 pts higher at 11042 while Cisco (-11% to USD42.7) pulled the Dow lower on the back of disappointing earnings guidance.

Malaysia. Underpinned by bargain hunting on banking and glove stocks after recent pullback as well as a 2nd consecutive day of net purchases by foreigners, KLCI rallied 19.8 pts to 1576.4. However, trading volume plunged 39% to 11.67bn shares worth RM4.97bn against 19.16bn shares valued at RM7.98bn on Wednesday amid reduced retailers participation amid extended consolidation on lower liners and penny stocks after recent rallies and dizzying volume. Market breadth was positive as gainers 607 edged losers 491.

Yesterday, foreign (RM106m) and local retailers (RM35) were the net buyers whilst local institutional investors (-RM141m) were the net sellers. YTD, foreigners net sold RM19.68bn shares compared with net purchases by local institutional funds (RM8.83bn) and retailers (RM10.85bn).


KLCI plunged as much as 79 pts to 1539 (12 Aug low) from a 7M peak from 1618 (28 July) before staging a steady recovery at 1576 yesterday, recording its 1st rebound in five days. Following a decisive reclaim above 1559 (50D SMA), KLCI is expected to retest higher towards 1583 (30D SMA), 1591 (9 June high) and 1600 in the short term, supported by bottoming up indicators. Formidable resistance remains at the rounding top 1618 levels. On the flipside, a breakdown below 1559 again will confirm that the bears are in control to trigger further slide towards 1539 and 1511 (200D SMA) zones.

Daily KLCI Chart: Building Base Near 1540 Zones


Following Bursa’s recent heavy and irrational trading volume (5-day average daily volume at 20bn shares), broader market sentiment is likely to remain cautious in the near term to consolidate and neutralize the excessive overbought condition, particularly on ACE, penny stocks and lower liners. While healthcare related stocks (gloves) may extend profit-taking consolidation on increasing vaccine development hopes, sectors deemed to benefit from post pandemic economic recovery (eg energy, financial services, gaming, technology, plantation, construction etc) should attract renewed bargain hunting interests to keep overall trading volume buoyant.

Despite a welcomed relief rally yesterday, the general trend for KLCI is still trapped in a range bound consolidation in wake of the domestic political uncertainty, a weak August reporting season, and intensified US -China geopolitical tension. Key supports are situated at 1511-1539 whilst stiff rounding tops resistance at 1591-1618 levels.


In Wake of the Market Uncertainty, We Took Profit on Armada (13.3% Gain) Yesterday.


Source: Hong Leong Investment Bank Research - 14 Aug 2020

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