Market Review

Malaysia: The FBM KLCI (-0.76%) trended lower as selling pressure on glove heavyweights were increasing throughout the trading session yesterday following the US Custom authority placing detention orders on TOPGLOV’s shipments on July 15. Meanwhile, broader market sentiment was affected by Shanghai stock market, which led to selloffs in small caps. On a side note, Bursa Exchange was halted for trading at 3:30pm caused by a technical issue.

Global markets: Although China’s 2Q20 GDP data came in above expectations, growing at 3.2% (vs. 2.5% consensus), Shanghai Composite Index declined 4.5%. On Wall Street, despite several better-than-expected corporate earnings as well as growing retail sales in June (+7.5%), the US markets snapped the 4-day winning streak and closed lower led by technology companies as traders digested worse than-expected weekly jobless claims numbers (+1.3m vs. 1.25m consensus).

The Day Ahead

Tracking the negative Wall Street performance, we expect profit taking activities on gloves sector may continue and the FBM KLCI is likely to see further consolidation today. Despite the rising Covid-19 confirmed cases, the developments of Covid-19 vaccines are surfacing in the news media; thus it could dampen the buying support on overall glove stocks in the near term.

Sector focus: We expect investors/ traders to reduce exposure on gloves and build up on other lagging sectors such as construction and property moving forward. Moreover, pharmaceutical industry will be in focus on the back of positive developments on vaccines.

FBMKLCI Technical Outlook

The FBM KLCI continues to trade lower for the second consecutive day after our indicators flashed a “sell” signal on 15-July. Hence, we expect a healthy retracement after a strong rally over the past two weeks, dragging the FBM KLCI towards the support along the 1,552, followed by 1,500. Meanwhile, resistance is set around 1,600-1,620

Source: Mplus Research - 17 Jul 2020