MARKET REVIEW

Global: In wake of another Dow’s rout of 632 pts or 2.7% on Tuesday, Asian markets tumbled in early sessions but managed to recoup the losses to end mostly higher, as optimism around further fiscal stimulus from Beijing to shore up the coronavirus-hit economy outweighed concerns over turmoil within the energy sector. Overnight, the Dow jumped 2% or 457 pts to 23476, snapping a 2-day losing streak as investors gained confidence from stabilising crude oil markets, better-than-expected corporate earnings reports (from Netflix and Texas Instruments) and expectations for Congress to roll out another US$500bn SME fiscal stimulus package.

Malaysia: Taking cue from the 2nd day of dismal closing on the Dow and the unprecedented plunge in oil prices, KLCI plunged as much as 22.2 pts to 1359.5 before staging a superb comeback to end 0.2-pt higher at 1381.9. Trading volume reduced to 5.10bn shares worth RM2.86bn against Tuesday’s 6.53bn shares valued at RM2.94bn, whilst market breadth was positive with 458 gainers vs 378 losers (G/L ratio1.21x) against 0.24x (Tuesday) and 1.16x (Monday) previously.

TECHNICAL OUTLOOK: KLCI

Following the bearish trend reversal Gravestone Doji pattern on 20 Apr (after refilling the long awaited 1369-1419 gap), KLCI slid 4.9% or 70 pts from a high of 1429 (20 Apr) to a low of 1359 (22 Apr) before rebounding to close at 1381.9 yesterday. Although the MACD/RSI/Stochastic indicators appear levelling off from their recent resistances, KLCI is only expected to witness some mild consolidations ahead as the index is still sustaining above the 20D/30D SMAs. Only a decisive violation below 1361 (20D SMA) would likely confirm that the bears are in control, with lower supports located near 1338 (30D SMA) and 1304 (23.6% FR) zones. Conversely, a successful breakout above 50D SMA or 1402 pts will lift index from consolidation mode to advance towards 1412 (50% FR) and 1429 before testing our LT target at 1460 (61.8% FR) levels.

MARKET OUTLOOK

Tracking overnight rebound on both the Dow and crude oil prices, KLCI may regain some losing grounds to retest the immediate 1402 (50D SMA) resistance. A successful breakout above SMA50 should lift index from consolidation mode towards 1412-1429 territories. Nevertheless, we still favour selling on strength as we roll into May as the economic reality should start to sink in soon due to concerns about weaker corporate earnings and relatively expensive valuations coupled with potential extension in after the MCO-3 ending on 28 April.

Source: Hong Leong Investment Bank Research - 23 Apr 2020