MARKET REVIEW

Global: Tracking Wednesday’s 1.9% slump on Dow due to bleak economic data and financial earnings, Asian markets ended mixed ahead of the China’s 1Q2020 GDP today. Sentiment was edgy during the Asian hours owing to the grim IMF’s warnings of a steepest downturn in global economy since the Great Depression as well as sliding oil prices amid coronavirus driven collapse of activity worldwide. Overnight, the Dow tumbled as much as 293 pts before ending modestly higher by 33 pts to 23538, led by technology-related companies (underpinned by strong TSMC results) against a backdrop of abysmal economic news (e.g. weekly jobless claims, housing starts and business activity report in the Philadelphia area) and mixed quarterly results (Morgan Stanley, Black Rock, United Health, Abbott Laboratories etc). Sentiment was boosted by news that Gilead drug showing effectiveness treating coronavirus and ahead of the release of Trump’s guidelines for phased-in re-opening of U.S. economy.

Malaysia: Tracking sluggish regional markets, KLCI eased 1.3 pts at 1386.5 on profit taking after soaring as much as 10.7 pts to 1398.5, a tad below our envisaged 1400-1419 resistance band. Trading volume decreased to 4.83bn shares valued at RM2.67bn against Wednesday’s 5.54bn shares worth RM2.73bn. Despite the headline loss, market breadth was positive with 624 gainers as compared to 253 losers, led by strong gains on FBM ACE (2.7%), FBM Small Cap (2%) and FBM Mid 70 (0.7%).

TECHNICAL OUTLOOK: KLCI

Despite the marginal 1.3 pts blip, KLCI’s uptrend towards refilling the 1369-1419 (16 March gap) resistance band remains intact, as the index is still firmly above the 10d/20d/30d SMAs. 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 immediate 1400 psychological barrier. Key supports are set situated at 1363 (10D SMA) and 1345 (20d SMA).

MARKET OUTLOOK

In wake of a strong rally of more than 700 pts on Dow futures (as at 8am) after tentative steps to restart the American economy and progress on the fight against the coronavirus coupled with, KLCI could continue to work its way to retest the 1400 pts barrier, barring a decisive breakdown below the 10D SMA support near 1363. Overnight strong performance of US-led technology stocks is likely to spur some trading interests on local technology players such as DUFU, KRONO, INARI, PENTA and REVENUE.

Source: Hong Leong Investment Bank Research - 17 Apr 2020