MARKET REVIEW

Global: Pending the Fed’s policy outlook this morning, Asian markets ended mixed yesterday as investors worried the rising risk-on sentiment and blistering rally overshot economic prospects. Sentiment was also dampened by the OECD’s grim world 2020/2021 economic projections (-6%/+5.2%: Single-hit scenario; -7.6%/+2.8%: Double-hit scenario) as the testing, tracking, tracing and isolating may not be enough to prevent a 2nd wave of COVID-19 outbreak as long as no vaccine or treatment is widely available. The Dow lost 282 pts or 1% to 26990 (+48% from COVID-19 low) even though the Fed pledged to hold interest rates unchanged at near zero through 2022, while keeping up at least its current pace of bond buying to support credit markets through the pandemic. Meanwhile, the Nasdaq finished 66 pts or 0.7% at 10020 (+51% from COVID-19 low) record high, led by gains in Amazon, Apple, Alphabet and Netflix.

Malaysia: Tracking choppy regional markets, KLCI ended flat (+0.11 pts to 1575.3) after traded within intra-day high of 1578.1 and a low of 1570, as investors continue to reassess optimism over reopening economies worldwide, the country's RM35bn Economic Recovery Plan and implementation of the Recovery MCO. Trading volume decreased to 7.61bn shares worth RM4.71bn as compared to Tuesday’s 9.10bn shares valued at RM6.20bn. Market breadth was positive with 626 gainers as compared to 415 losers.

TECHNICAL OUTLOOK: KLCI

Following KLCI’s rally to a near five-month high at 1575.3 (+30.4% from COVID-19 bottom 1208) and recorded its 9th day of gains in 10 trading days yesterday, profit-taking pullback is overdue and should act to stall upside temporay. With the formation of a shooting star pattern and overbought indicators, KLCI is expected to witness more sideways consolidation ahead with key supports at 1550 and 1540 (LT downtrend resistance-turned support). Failure to hold at 1540 may suggest a deeper pullback is taking place towards 1517 (200D SMA) and 1500 levels. Key resistances remain at 1600 and 1612 (YTD high).

MARKET OUTLOOK

In sync with recent pullback on Dow and the formation of a bearish shooting star pattern and grossly overbought indicators in KLCI, the index is likely to engage in short term consolidation with optimism over reopening economies worldwide increasingly baked into share prices and stall further rally. For stock selections, traders should take profit on tourism-related stocks such as GENTING, GENM, AIRASIA and AIRPORT amid imminent pullback due to grossly overbought readings.

Source: Hong Leong Investment Bank Research - 11 Jun 2020