MARKET REVIEW

Global: Asian stocks ended mixed on Wednesday, with losses led by Thailand ( -2%), Indonesia (-1.7%) and Hong Kong (-1.2%), as IMF’s warnings of a global recession and a sharp decline in oil prices offset a key interest rate cut by the PBOC and news that the spread of the virus has peaked in Europe and the US as authorities around the world prepare plans to ease restrictions and reopen businesses. Overnight, the Dow tumbled 1.86% to 23504 due to dismal economic data from plunging retail sales and NY manufacturing output coupled with sluggish US 1Q20 banks earnings from Bank of America, Citigroup and Goldman Sachs. Overall, analysts expect S&P 500 1Q20 earnings to slash by 12.8% YoY.

Malaysia: KLCI rallied 1.2% at 1387.8 to register its 2nd straight gains due to active buying interests on index-heavyweights i.e. PCHEM, IHH, AXIATA, MAYBANK, MISC and TENAGA. Trading volume increased to 5.54bn shares worth RM2.73bn. Market breadth was positive amid further signs of stability on the Covid-19 outbreak and positive IMF’s forecast on Malaysia economy (GDP to contract 1.7% in 2020 before surging 9% in 2021).

TECHNICAL OUTLOOK: KLCI

Following the crossover of 10D/30D SMAs yesterday, the odds are getting higher for the KLCI to advance within the 1369-1419 (16 March gap) resistance band. Meanwhile, the MACD remains firmly above the signal line whilst the RSI and stochastic indicators appear to be turning up again, implying the index may continue to work its way to test the 1400 psychological barrier. Support is set around 1332-1357.

MARKET OUTLOOK

Despite overnight slump on Dow and sliding oil prices, sentiment is likely to be cushioned by commendable IMF outlook on Malaysia economy and signs of flattening curve of Covid-19 outbreak in Malaysia (only 85 new cases yesterday and the lowest in nearly a month) coupled with news that Trump would announce “new guidelines” for reopening the US economy . Technically, KLCI could continue to work its way to test the 1400 pts, barring a decisive breakdown below the 10D SMA support near 1357. Nevertheless, we reiterate SELL INTO RALLY as the risk to reward is not as favourable after the recent technical rebound.

TECHNICAL TRACKER: CLOSED POSITION

We had squared off our position on ZHULIAN (9% gain) yesterday after hitting the R1 (RM1.09) resistance.

Source: Hong Leong Investment Bank Research - 16 Apr 2020