MARKET REVIEW

Global: Asian bourses were higher in line with a 3.9% rally on Dow as investors cheered the gradual reopening of global economy and positive data from Moderna's experimental COVID-19 vaccine, lifted hopes of a faster recovery from the pandemic-driven economic slump. Overnight, the Dow tumbled 391 pts to 24207, following a report from STAT that questioned the validity of the results of Moderna’s vaccine trial and Wall Street braced for a potentially protracted economic recovery as the Congressional Budget Office (CBO) projects GDP dropping 38% in 2Q20.

Malaysia: In conjuction with a 3.9% rally on Dow overnight, soaring Brent oil prices coupled with a recovery in FCPO following news that India buyers had resumed buying Malaysian CPO products after a four-month interval due to a diplomatic row, KLCI jumped 13.8 pts at 1424 to record its 5th consecutive gains. Trading volume eased to 9.51bn shares worth RM4.65bn against historic high 11.2bn shares worth RM4.41bn on Monday, with focus on palm oil, O&G and COVID-19 related stocks. Market breadth was negative with 500 gainers as compared to 554 losers, as COVID-19 winners and O&G stocks started to experience profit taking after recent rally.

TECHNICAL OUTLOOK: KLCI

After establishing a solid base above the 20D/50D SMAs in the last two weeks, KLCI finally staged a bullish triangle breakout yesterday, supported by positive daily and weekly indicators. The breakout will spur the index to advance further towards 1448 (20W SMA) and 1459 (100D SMA) zones thereafter. Conversely, violating the supports at 1390 (20D SMA) and 1363 (50D SMA) could put the bears in the driving seat again, heading towards 1359 (22 Apr low) levels.

MARKET OUTLOOK

Technically, KLCI could continue its run-up to break the 1429 (20 Apr high) resistance after a positive triangle breakout yesterday, supported by favourable daily and weekly technicals. Nevertheless, profit taking consolidation may capped further upside as market is digesting recent historic trading volumes, the long Hari Raya holidays (Bursa will be closed on 25-26 May), ongoing results season, and a 1.6% pullback on Dow overnight.

CLOSED POSITION

Yesterday, we had squared off our positions on MHB (18.7% gain), ROHAS (5.9% gain) and GADANG (13.6% gain) as share prices hit our R1/R2 upside targets.

Source: Hong Leong Investment Bank Research - 26 May 2020