MARKET REVIEW

Global: Asian markets ended lower as investors braced for an onslaught of negative news around the Covid-19. However, many bourses erased losses to close higher, led by energy shares as crude oil futures jumped prior to Trump’s meeting with US energy industry executives, coupled with expectation of the Saudi Arabia-Russia feud to end soon. Overnight, the Dow slipped as much as 208 pts following a record surge in jobless data to 6.65m last week. However, the index staged a superb 678-pt rally to end 470 pts higher at 21413 amid hopes for a truce in the price war between Saudi Arabia and Russia for a cut in oil output (as much as 10m bpd) coupled with a detente between global US mega oil producers tonight might be achieved to slash oil production and stabilize battered prices.

Malaysia: After a 28.2-pt post 1Q20 window dressing blues, KLCI rebounded 8.2 pts to 1330.9, driven by expectations that BNM (slated to release 2019 Annual Report today) and the cabinet will consider new measure and further stimulus package to bolster Malaysian economy. Sentiment was also boosted by WHO’s report that its number of virus cases in Malaysia is expected to peak in mid-April and there are signs of a flattening of the infection curve. Trading volume increased to 5.25bn shares worth RM2.44bn as compared to Wednesday’s 4.74bn shares worth RM2.77. Market breadth was positive with 671 gainers as compared to 203 losers.

TECHNICAL OUTLOOK: KLCI

After retesting a few rounds near the 1,350 zone, profit taking activities have emerged and the FBM KLCI retreated by 2% yesterday. Both the MACD and RSI indicators are flattening but the stochastic oscillator is heading towards overbought region. As long as KLCI is closing above 10D SMA near 1218, the index is still likely to retest 1353 (26 March high), 1363 (38.2% FR) and the formidable hurdles at 1369-1419 gap (16 March) before a strong pullback emerges. Conversely, failure to hold at 1318 will trigger further selling spree towards 1300/1270 levels.

MARKET OUTLOOK

Taking cues from overnight Dow’s 2.2% rebound and hopes of more business friendly BNM policies and government stimulus measures to spur domestic ailing economy, KLCI could still advance further to retest 1353 (26 March high) and 1363 (38.2% FR) territory before profit taking pullback near the formidable hurdles at 1369-1419 gap (16 March). We reiterate SELL INTO STRENGTH strategy and rebalance portfolio to sectors that are more defensive as the world has clearly entered a recession (based on IMF) due to the coronavirus pandemic.

Source: Hong Leong Investment Bank Research - 3 Apr 2020