Market Review

Malaysia: The FBM KLCI (-0.8%) endured a choppy trading session before succumbing to the greater selling pressure in selected index heavyweights (TOPGLOVE and HARTA) in the second half of the trading session yesterday. The lower liner, however, rebounded, while the broader market closed mixed as the energy sector (+2.2%) outperformed ahead of OPEC and allies meeting.

Global markets: US stockmarkets extended their gains as the Dow climbed 0.9% driven by optimism over the vaccine developments for Covid-19. European stockmarkets advanced, taking cue from gains across Wall Street, while Asia equities closed mixed yesterday.

The Day Ahead

We see the consolidation on the FBM KLCI taking shape as the rally in glove heavyweights lose steam following the positive developments from Moderna in their clinical trial test on Covid-19 patients. For now, investors will be keeping an eye on China’s 2Q2020 GDP data today as a yardstick to economic recovery performance after lifting the lockdown. Back home, we see rotational play taking place as investors shifted to other sectors apart from healthcare stocks.

Sector focus: While we think that plantation stocks will remain on upbeat mode, energy stocks may make a gradual comeback on the higher crude oil prices after OPEC and allies will taper production cut to 7.7m bpd until December 2020 following the prospects of improving demand, coupled with the surprise drawdown in US inventory.

FBMKLCI Technical Outlook

The FBM KLCI has formed a bearish candle to extend its losses on a choppy trading session yesterday. For now, we deem the pullback to be healthy, allowing investors to digest the recent run-up with the key index supported at 1,580, followed by 1,550. On the upside, we continue to think that the immediate hurdle is located at 1,615, followed by 1,630. Indicators are now mixed as the MACD Histogram has extended another red bar, while the RSI remains above 50.

Market Scorecard

Source: Mplus Research - 16 Jul 2020