MARKET REVIEW

Global: Asian stock markets fell as investors caution over potential for 2nd wave of COVID- 19 infections worldwide as more countries reopen their economies. A 2nd wave of infections would likely unsettle the rally in equity markets and trigger severe and prolonged global recession. Meanwhile, Dow plunged 2.2% or 517 pts to 23248 but off their lows of 23067 (-698 pts) as somber comments from Powell about the economic outlook in the aftermath of the COVID-19 pandemic crashed buying enthusiasm on Wall Street.

Malaysia: Bucking lacklustre regional markets, KLCI jumped 17.2 pts or 1.3% to 1397.1 as the 1Q20 GDP beat expectations and earlier concern of a no-confidence motion against the PM was temporay removed as the 1-day Parliament resitting on 18 May will only feature King's address and there would not be any other government business to attend to. Trading volume increased to 9.59bn shares valued at RM5.1bn against Tuesday’s 6.39bn shares worth RM3.73bn, led by robust buying interests on ACE stocks and lower liners coupled with COVID-19 winners amid 2nd wave of virus jitters.

TECHNICAL OUTLOOK: KLCI

Despite the 17.2-pt gain, KLCI is still not out of the woods yet. Short term consolidation mode to prevail unless the benchmark can stage a solid breakout above stiff double resistances at 1418 (18 Apr) and 1429 (20 Apr). Conversely, breaking below the 1383 (20D SMA) and 1369 (50D SMA) supports would put the bears in the driving seat again, with lower downside towards 1359 (22 Apr low) and 1344 (38.2% FR) levels thereafter.

MARKET OUTLOOK

Tracking recent 3-day 1083 pts pullback on the Dow, local sentiment is likely to rem ain cautious. Following a 15.6% relief rally from 1208 (19 Mar) trough, KLCI could experience some degree of profit taking (with key supports at 1350-1370), ahead of the ongoing reporting season, worries of US-China conflict and 2nd wave of coronavirus infections coupled with Powell’s bearish view on US economic outlook which is “both highly uncertain and subject to significant downside risks”. On local stocks, we believe that yesterday’s upmove has sent the glove makers into their respective extremely overbought levels and rich valuations, and hence a profit taking pullback may be just be around the corner.

CLOSED POSITION

Yesterday, we had squared off our position on FOCUSP (8.7% gain) after hitting our R1 upside target.

Source: Hong Leong Investment Bank Research - 14 May 2020