Market Review

Global: Tracking overnight 2.2% surge on Dow, Asian markets rallied in the early sessions as encouraging COVID-19 vaccine development and optimism for the global economy reopening lifted spirits. However, the gains were pared off in the evening due to fresh anti government protests and heightened US-China tensions as Trump’s administration is weighing a range of sanctions on Chinese officials, businesses, and financial institutions. Lifted by a strong rally in financials, the Dow rallied 553 pts or 2.2% to 25548 as encouraging COVID-19 vaccinations and optimism for the global economy reopening lifted sentiment, despite the battered state of the American economy (based on the latest “Beige Book” report) and heightened turmoil between Beijing and Washington after Mike Pompeo said Hong Kong no longer warrants special treatment under US law, potentially a big blow to its autonomy status as a major financial hub.

Malaysia: After falling 15.4 pts last Friday ahead of the long Raya holidays, KLCI managed to stage a 15-pt rebound to end at 1451.7, driven by the gloves, plantation, and oil & gas stocks. Trading volume jumped to 7.20bn shares worth RM4.78bn as compared to Friday’s 6.69bn shares valued at RM4.19bn. Market breadth was positive with 582 gainers as compared to 406 losers.

TECHNICAL OUTLOOK: KLCI

After staging a bullish triangle breakout and surpassed 1429 (20 Apr high) neckline hurdles, KLCI hit a high of 1458 yesterday before closing at 1451.7, a tad below 100D SMA of 1452.2. For now, the index is poised to stage a strong breakout above the 100-day SMA swiftly and advance further towards 1460-1480 gap (9 Mar), 1500 and the next formidable 1520 (200D SMA) territory in the next few weeks, boosted by bullish weekly technicals. Conversely, violating key supports at 1429 and 1412 (50% FR and support trendline) could suggest that the market is losing upwards momentum and the bears are in the driving seat again, pushing index lower at 1400 and 1364 (38.2% FR) levels.

MARKET OUTLOOK

In wake of further rally in Dow, underpinned by abundant liquidity and encouraging COVID- 19 vaccinations coupled with optimism for the global economy reopening, KLCI is expected to climb higher to refill the 1460-1480 gap on 9 Mar, despite facing setbacks such as ongoing weak results season and escalating US-China tensions. Mirroring Wall St, financial stocks like RHBBANK, ABMB, CIMB, MAYBANK and AFFIN could see active trading interests after recent bashdown in share prices.

Source: Hong Leong Investment Bank Research - 28 May 2020