MARKET REVIEW

Global: Most Asia markets ended higher, led by strong gains in the Nikkei 225 and Asean markets, following a robust US jobs numbers in May and an extension of oil-production cuts by OPEC+ last Saturday to extend a production cut by nearly 10m barrels/day through the end of July. Sentiment was also fanned by the re-opening of coronavirus-stricken economies from shutdowns, supported by stimulus measures from governments and central banks. The Dow rallied 461 pts or 1.7% at 27572 (+51% from COVID-19 bottom 18214) to record its 6th straight gains whilst the Nasdaq Composite surged 111 pts or 1.1% to close at new record high 9925 (+50% from COVID-19 bottom 6631), as sentiment was boosted by a strong May jobs data last Friday and optimism about the reopening of the US economy, supported by a barrage of government and Fed stimulus.

Malaysia: Ahead of the RM35bn economic relief plan announcement and an extended long holidays on 8 June (Agong's Birthday), KLCI eased 5.5 pts to 1556.3 (+83.3 pts or 5.6% WoW) last Friday after traded within 1564.1 and a low of 1547.6. Trading volume increased to 8670.32 mil shares worth RM6199.76 mil as compared to Thursday’s 8187.73 mil shares worth RM6115.36 mil. Market breadth was negative with 427 gainers as compared to 615 losers.

TECHNICAL OUTLOOK: KLCI

After surpassing the key 200D SMA (1517 now) and LT downtrend line from 1896 (Apr 2018 high) coupled with bullish Wall St performance, the bulls are in control to spur KLCI to our envisaged 1600 and 1612 (YTD high on 7 Jan) hurdles before bracing for a healthy profit taking amid grossly overbought RSI and slow stochastic readings. Key supports are situated at 1534 (LT downtrend resistance-turned-support), 1517 and 1492 (10D SMA) levels. Failure to stay above 1492 could disrupt the uptrend momentum and potentially triggering further correction towards 1446 (100D SMA) and 1425 (30DSMA) zones.

MARKET OUTLOOK

After surpassing the key 200D SMA and LT downtrend line from 1896 in Apr 2018, the liquidity-driven bulls are in control to lift KLCI to 1600-1612 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 (+28.9% from COVID-19 bottom 1208) may undergo a healthy pullback with key supports situated at 1492-1534 levels. On stocks’ selection, we opine that GENM, GENTING, AIRASIA, AIRPORT, PARLO, IMPIANA and SHANG could witness some buying interests following the announcement of the recovery movement control order (RMCO), which allows the domestic tourism sector to resume operations starting from 10 June in an effort to revive Malaysia’s economy.

Source: Hong Leong Investment Bank Research - 9 Jun 2020