MARKET REVIEW

Global: Asian bourses ended mixed due to fears of worsening US-China ties after Trump again blamed China over the origin of the COVID-19 outbreak and saying he has no interest in speaking to President Xi right now and threatened to even cut ties with Beijing. Last Friday, the Dow inched up 60 pts at 23685 (still plunged 646 pts WoW) after swinging between gains and losses. Sentiment was cautious as investors weighed worries about a bruising US-China trade turmoil (as the White House moved to block shipments of semiconductors to Huawei) and a grim U.S Apr retail sales. However, growing optimism of a varying degrees of easing lockdowns and expectations of another coronavirus relief bills by Democrat boosted sentiment.

Malaysia: In line with higher Wall St and oil prices, KLCI gained 6.2 pts to 1403.4 (+21.1 pts WoW) after lingering within 1398.7-1408.2 band. Trading volume increased to 9.23bn shares worth RM3.87bn as compared to Thursday’s 7.01bn shares worth RM4.04bn, dominated by COVID-19 winners of gloves and healthcare-related companies as well as lower liners. Market breadth was positive with 592 gainers as compared to 316 losers.

TECHNICAL OUTLOOK: KLCI

In the last four weeks, KLCI was able to establish a solid supports near 1359-1367 levels, providing a good platform for further traction towards double resistances at 1418 (18 Apr) and 1429 (20 Apr) levels. Breaking these hurdles would lift KLCI to test the formidable resistance at 1462 (100D SMA) zones. Conversely, violating the supports at 1387 (20D SMA) and 1375 (30D SMA) could put the bears in the driving seat again, heading towards 1359 (22 Apr low) and 1344 (38.2% FR) levels. Both the MACD and RSI are flattening whilst the slow stochastic indicator is on uptrend, signalling potential upside bias in a sideways consolidation pattern.

MARKET OUTLOOK

The Parliament resitting today is likely to be a non-event as the agenda only entails a speech by the King. As the daily and weekly technicals are on the mend, KLCI could rise further but upside could be capped at 1418-1429 zones, as market is digesting last week historic trading volumes and ahead of the extended Hari Raya holidays (Bursa will be closed on 25-26 May). Meanwhile, active trading interests could be seen on HSR-related counters (eg ECONBHD, GBGAQRS, GADANG, HSSEB) amid news of the HSR to be revived soon (source: The Edge Malaysia). Also, the bullish inverted Head & Shoulder pattern on Brent oil prices in anticipation of rising demand as the global economy emerges from lockdowns could ignite trading interests on oil & gas related stocks (eg HIBISCUS, DIALOG, MHB, DAYANG, VELESTO, UZMA, CARIMIN, SERBADK).

Source: Hong Leong Investment Bank Research - 25 May 2020