Market Review

Malaysia: The FBM KLCI (-1.1%) retreated alongside with the weakness across global equities as investors were spooked by the US Federal Reserve economic outlook that may see benchmark interest rates to stay at record low levels till 2022. The lower liners all retreated, while all 13 major sectors finished lower with the energy sector (-3.3%) taking the biggest hit.

Global markets: US stockmarkets endured another rout as the Dow (-6.9%) marked its biggest daily loss since March 2020 as investors turned risk-off mode amid the pace of future economic recovery prospects. Both the European and Asia equities were also battered spooked by the renewed selldown.

The Day Ahead

The unabated selloff on Wall Street overnight coupled with the sharp decline on commodity prices may see weakness permeates to stocks across Bursa Malaysia. While we reckon that the selldown may be imminent, we think that the weakness will be accompanied by mild bargain hunting activities on beaten down stocks, cushioning the initial weakness that may take place at the start of the session.

Sector focus: In view of the renewed volatility, the higher safe haven asset prices bode well for gold manufacturers and retailers. Meanwhile, concerns over the potential second wave of Covid-19 outbreak may see healthcare sector to take the lead again.

The key index’s rally has taken a pause as the FBM KLCI formed a bearish candle, confirming the pullback after a shooting star candle was formed on Tuesday. With renewed volatility rocking the global equities, coupled with the lower crude oil prices, we see further weakness in place. The pullback may see the local bourse to be supported at the 1,530 level and if the aforementioned level fails to defend, the 1,510 level could be re-visited. Upsides are capped at the 1,600 psychological level.

Source: Mplus Research - 12 Jun 2020