MARKET REVIEW

Global: Most Asian markets were closed on 1 May due to Labour Day holiday except Australia and Japan markets, which plunged 5.1% and 2.8%, respectively as sentiment was battered by threats of new tariffs from Trump against China to retaliate for the spread of the coronavirus out of Wuhan and a slew of bleak US economic data and corporate earnings.

In US, the Dow tank 622 pts or 2.6% to 23723 (-0.2% WoW) last Friday, kicking off May on a downbeat note (after surging 11% in April) as investors showed disappointment with earnings from Apple and Amazon and a ratcheting up of tension with China.

Malaysia: Ahead of the Labour Day, KLCI rallied 27.5 pts or 2% to 1407.8 (+2.8% WoW/4.2% MoM), cheered by a rebound in oil prices, and encouraging early results of a Covid-19 treatment trial coupled with expectations of further MCO relaxations ahead of PM’s special address on 1 May. Trading volume jumped to 5.85bn shares worth RM3.35bn against Wednesday’s 4.82bn shares worth RM2.46bn, supported by bullish market breadth with 629 gainers vs 298 losers. We also noticed foreigners bought RM124m net of local equities after selling about RM1.92bn in the last 11 consecutive sessions.

TECHNICAL OUTLOOK: KLCI

After forming a Gravestone Doji on 20 Apr and retreated to a low of 1359 (22 May), KLCI managed to build a base near the immediate 20D SMA support over the past 6 trading days, before staging a strong 27.5-pt rebound at 1407.8 last Thursday to surpass 50D SMA (1383). MACD Indicator is hovering marginally above zero whilst the RSI and Stochastic oscillators are bottoming up, indicating further advance to retest key hurdle at 1429 (20 Apr high). Conversely, failure to hold above 50D SMA would trigger more weaknesses towards 1374 (20D SMA) and 1359 (22 Apr low) territory.

MARKET OUTLOOK

Tracking a 2-day 910 pts rout on Dow, Bursa Malaysia is likely to experience a choppy session this week in anticipation of a poor upcoming May reporting season and renewed US-China trade tensions coupled with the concern of new wave of infections over the premature move to ease MCO. Nevertheless, the downside risk may be cushioned by expectations of another OPR cut on 5 May and a positive technical breakout above 50D SMA last Thursday. Meanwhile, aviation stocks (eg AIRASIA, AAX, and AIRPORT) could witness some selling pressures after Berkshire disposed entirely of its positions in the US airline industry due to Covid-19.

CLOSED POSITION

Last Thursday, we took profits on SALUTE (Technical tracker 11.5% gain), MUDAJYA (Technical tracker 6.7% gain) and OPENSYS (2Q20 stockpikcs 5.7% gain) after hitting the R1/R2 upside targets, as well as closing MFLOUR (Technical tracker 0.0%) due to weakening technicals.

Source: Hong Leong Investment Bank Research - 11 May 2020