MARKET REVIEW

Global: Led by strong gains of benchmark indices in South Korea (8.6%), Japan (7.1%) and Singapore (5.8%), Asian markets recouped most of the Monday’s losses, boosted by the Fed’s promise to buy as many Treasurys and other assets as needed to keep financial markets functioning as Congress delayed action on a US D2 trillion coronavirus aid package. Overnight, after a brutal 37.1% correction from all-time high of 29568 (12 Feb) to 18592 (23 Mar), the Dow staged a 2113-pt or 11.4% relief rally at 20705 as investors bet that the Capitol Hill would back a USD2 trillion economic rescue package as soon as tonight.

Malaysia: Tracking higher regional markets, coupled with Bursa and SC suspending short selling (to cushion irrational selloff and support an orderly market) as well as positive expectation of a more comprehensive COVID-19 stimulus package on 30 Mar (to soften the blow from the coronavirus outbreak and weak oil prices), KLCI soared 31.3 pts to 1291.1 (off intraday high of 1311.2), overshadowed the fear that the the government may consider extending the Movement Control Order (MCO) by up to two weeks beyond 31 March. Trading volume increased to 3.17bn shares worth RM2.18bn as compared to Monday’s 2.8bn shares worth RM2.32bn. Market breadth was positive with 756 gainers as compared to 155 losers.

TECHNICAL OUTLOOK: KLCI

After sliding 25% or 404 pts from YTD high of 1612 (7 Jan) to a low of 1208 (19 Mar) yesterday, KLCI had staged a brilliant recovery 83-pt relief rally to 1291 yesterday. The MACD has flattened while the RSI and Stochastic oscillators have hooked up, signalling further bottoming up trend. After surpassing 23 March high of 1275 and boosted by overnight 11.4% rally on Dow, KLCI could rally further towards 1310-1320 levels. Formidable resistance is the 13 Mar gap of 1369-1419 zones. Key supports are at 1260/1240/1200.

MARKET OUTLOOK

Following Dow’s 11.4% surge overnight amid stimulus deal hopes, KLCI sould stage a back-to back gain today, boosted by Bursa and SC suspension of short selling and positive expectation of a more comprehensive COVID-19 stimulus package on 30 Mar (to soften the blow from the coronavirus outbreak and weak oil prices). However, FTSE Russell’s decision about keeping Malaysia in its World Government Bond Index (by end March) and the fear that the government may consider extending the MCO could cap further rally beyond 1350-1360 zones.

Source: Hong Leong Investment Bank Research - 31 Mar 2020