MARKET REVIEW

Global: Despite China’s 1Q2020 GDP shrinking by 6.8% YoY (Source: National Bureau of Statistics of China) caused by the Covid-19 outbreak following a series of large scale lockdown and quarantines throughout a few cities, regional stock markets ended on a positive note. Also, positive sentiment could be emerging due to a report suggesting that Gilead Sciences drug was showing effectiveness in treating the coronavirus in the US as well as President Trump issuing guidelines to open up parts of the US and to allow employees returning to work, contributing to an upward rebound on Wall Street.

Malaysia: Similarly, the FBM KLCI gained traction throughout the session and surged above 1,400 to close at 1,407.34 pts (+1.5%). Market breadth was positive with decliners overwhelming advancers by a ratio of 7-to-1, accompanied by trading volume of 6.31bn shares, worth RM3.02bn. We noticed that technology, construction and industrial products sectors were among the leading sectors on last Friday.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has continued its rebound and closing above the 1,400 level (forming 3rd winning week out of the past 5 weeks). The MACD Line is approaching zero, but both the RSI and Stochastic oscillators are overbought at this juncture. As the sentiment is still positive we believe the FBM KLCI could fill up the gap near the 1,419 level in the near term. Should it breach above this level, further resistance will be at 1,460. Meanwhile, support is located around 1,400, followed by 1,363.

MARKET OUTLOOK

In view of positive performance on Wall Street last week as investors brushed off concerns over coronavirus pandemic situation, we believe buying interest may persist on the local exchange, forming an extended rebound on the FBM KLCI. However, based on the overbought technical readings on FBM KLCI, we think the upside could be limited around 1,419 and key index should form a consolidation phase between 1,370-1,419 levels. In the meantime, traders are advised to continue monitoring healthcare related segment such as gloves, mask and sanitisers related stocks for trading opportunities.

Source: Hong Leong Investment Bank Research - 27 Apr 2020