MARKET REVIEW

Global: After rallying to a near 3-month high, Asian markets ended mixed as investors assessed the prospects of economic recovery from a coronavirus-led slump against deepening worries about US-China trade tensions after the Trump administration barred Chinese passenger carriers from flying to the United States. Ahead of the crucial nonfarm payrolls report tonight, the Dow reduced its earlier 114-pt gain to 12 pts at 26282 (+44% from COVID-19 bottom of 18214) as weekly jobless gains topped estimates and rising civil unrest coupled with escalating US-China tension after Pompeo urges global stock exchanges to tighten rules for Chinese companies.

Malaysia: Led by a strong rebound in the financials and healthcare stocks, KLCI rose for a 7th straight session to close 23.3 pts or 1.5% higher at 1561.8 (+29.3% from COVID-19 trough of 1208), as easing lockdowns and expectations of government stimulus helped boost hopes of economic recovery. Trading volume decreased to 8.2bn shares valued at RM6.1bn against Wednesday’s 9.4bn shares worth RM7.0bn. Market breadth was positive with 634 gainers as compared to 389 losers.

TECHNICAL OUTLOOK: KLCI

After surpassing the key 200D SMA and LT downtrend line from the all-time high of 1897, the bulls are in control to spur KLCI to our envisaged 1560-1600 psychological barriers. However, given the grossly overbought RSI and slow stochastic readings, the index may undergo a healthy pullback towards 1518/1500/1480 levels. Failure to stay above 1480 could suggest that the bulls are taking a breather, potentially triggering further correction towards another down leg at 1388-1400 zones.

MARKET OUTLOOK

After surpassing the key 200D SMA and LT downtrend line from the all-time high of 1897, the liquidity-driven bulls are in control to lift KLCI to another leg up towards 1560-1600 psychological barriers, as investors clung to optimism for a gradual re -opening of economies from the COVID-19 lockdowns and supported by the unprecedented fiscal and monetary stimulus as backstops. However, given the grossly overbought RSI and slow stochastic readings, the index may undergo a healthy pullback towards 1518/1500/1480 levels in the short term.

Source: Hong Leong Investment Bank Research - 5 Jun 2020