MARKET REVIEW

Global: Asian markets ended mixed after skepticism over Moderna's COVID-19 trial vaccine dampened hopes of a faster recovery from the coronavirus-induced recession. Overnight, Wall St ended strongly, led by Facebook, and Amazon closed at record highs as investors continued to cheer efforts to reopen all US States in phases. Energy stocks were also among the biggest gainers after weekly crude supplies fell, boosted by hopes for a recovery in oil demand as economic reopening efforts continue. The Dow rallied 1.5% to 24576 and the S&P 500 jumped 1.7%, while the Nasdaq surged 2.1%.

Malaysia: Bucking mixed regional markets and falling Dow overnight, KLCI soared 11.2 pts to 1435, recording its 6th consecutive gains amid strong buying interests in healthcare related, plantation, and utility stocks. The sentiment was also boosted by expectations of an impending rate cut on 7 July MPC meeting after Apr inflation declined 2.9% YoY. However, trading volume eased to 6.74bn shares worth RM3.64bn against Tuesday’s 9.51bn shares as investors reduced buying ahead of the extended Raya holidays. Market breadth was positive with 561 gainers vs 356 losers.

TECHNICAL OUTLOOK: KLCI

After establishing solid downtrend resistance breakouts and surpassed 1429 (20 Apr high) neckline hurdle, KLCI is slated to advance further towards 1450 (20W SMA) and 1461 (61.8% FR) zones, supported by positive daily and weekly indicators. Conversely, violating the supports at 1413 (50% FR) and 1391 (30D SMA) could put the bears in the driving seat again, heading towards 1359 (22 Apr low) levels.

MARKET OUTLOOK

We expect a two-tier market to prevail as KLCI is expected to exhibit strength to advance further to test 1450-1460 levels, supported by the bullish triangle breakout and positive daily and weekly technicals. Nevertheless, smallcap and lower liners are likely to witness further sideways consolidation and declining participation ahead of the long Hari Raya holidays (Bursa will be closed on 25-26 May) and ongoing results season.

Source: Hong Leong Investment Bank Research - 21 May 2020