MARKET REVIEW

Global: Most Asian markets rebounded yesterday, supported by a firmer finish on Dow amid a rally in tech and energy stocks eclipsed worries about simmering U.S.-China tensions over the coronavirus' origin. Sentiment was also boosted by the gradual re opening of countries and regions that were hard hit by the COVID-19 pandemic. Overnight, the Dow rose 133 pts (but off session highs +420 pts) to 23883, spurred by the energy related stocks as oil prices gained for the 5th straight day and the gradual reopening of the global economy from its coronavirus lockdown, overshadowed the grim economic data and lackluster earnings reports.

Malaysia: KLCI jumped 13 pts (recouped 42% of 31 pts slide on 4 May) to 1389.6, as sentiment was lifted by higher oil prices and another 50 bps OPR cut to 2% (the lowest since 2010) to help to cushion the recessionary effects expected in the 1H20, given the effect of Covid-19 and the MCOs. Trading volume was higher at 5.76bn shares worth RM2.70bn against Monday’s 5.47bn shares worth RM2.48bn. Market breadth was bullish with 774 gainers vs 162 losers.

TECHNICAL OUTLOOK: KLCI

After diving 31.2 pts on 4 May, KLCI staged a 13-pt technical rebound to end finish at 1389.6, recapturing above the 50D SMA (now at 1378). As long as the index stays comfortably above 50D SMA, the odds would remain in favour of the bulls to re -challenge 1400, 1413 (50% FR) and 1429 20 Apr high) zones. MACD Indicator is hovering marginally above zero whilst the RSI and Stochastic oscillators are hovering near neutral zones. In the short term, KLCI is expected to lock in range bound mode, with key supports at 1378, 1359 (22 Apr low) and 1348 (lower BB).

MARKET OUTLOOK

Ahead of the Wesak day holiday tomorrow, KLCI is likely to lock in range bound consolidation mode in the short term (1359-1429 band)as we await the start of a tepid May reporting season and renewed US -China trade tensions coupled with the concern of new wave of infections as we brace for the conditional MCO. Nevertheless, the downside risk may be cushioned by a rebound in oil prices and a 0.5% OPR cut to revive an ailing domestic economy.

Source: Hong Leong Investment Bank Research - 6 May 2020