MARKET REVIEW

Global: Tracking an overnight rally on Dow, most Asian markets ended higher as easing of coronavirus-induced lockdowns in many countries continued to fuel optimism about a quick economic recovery. However, most markets closed off intraday peak as investors took profit ahead of the Fed meeting (ending tomorrow) and following a pessimistic outlook by the World Bank that expects the global economy to shrink by 5.2% (the deepest recession since the WWII). In wake of concerns of the blistering rally in risk assets overshooting economic prospects, the Dow slid 300 pts at 27272 (snapping a 6-day winning streak) as investors took profit and await more clarity on the state of the economy and further stimulus from the Fed’s meeting. Meanwhile, the technology-laden Nasdaq closed 29 pts higher at all-time high 9953 (off daily peak of 10002), as investors piled back into technology darlings.

Malaysia: In line with bullish Dow and regional markets coupled with strong rebound in oil prices, KLCI rallied as much as 34.5 pts to 1590.8 but narrowed the gains to 18.8-pt at 1575.2 as investors cheered the lifting of the conditional MCO with recovery MCO on 10 June (reopen nearly all economic activity and allow interstate travel) and a RM35bn “Short Term Economic Recovery Plan (PENJANA). Trading volume increased to 9.10bn shares worth RM6.20bn as compared to Friday’s 8.67bn shares valued at RM6.20bn. Market breadth was positive with 779 gainers as compared to 328 losers.

TECHNICAL OUTLOOK: KLCI

Following the successful breakouts above the the key 200D SMA (1517 now) and LT downtrend line from 1896 high in April 2018 coupled with bullish Wall St performance, KLCI surged as much as 34.5 pts to 1590.8 (+31.7% from COVID-19 bottom) before easing its gains to 18.8 pts at 1575.2 to form a shooting star pattern. With the formation of a shooting star pattern and grossly overbought indicators, KLCI is expected to witness some healthy profit taking in the near term after a huge rally. Key supports are situated at 1550, 1540 (LT downtrend resistance-turned-support) and 1517 levels. Key resistances remain at 1600 and 1612 (YTD high).

MARKET OUTLOOK

KLCI surged as much as 34.5 pts to 1590.8 (+31.7% from COVID-19 bottom) before paring its gains to 18.8 pts at 1575.2 yesterday on profit taking. With the formation of a bearish shooting star pattern and grossly overbought indicators, KLCI is expected to witness some healthy profit taking consolidation in the near term to neutralise the steeply overbought

CLOSED POSITION

Yesterday, we had squared off our position on KPOWER (18.1% gain) after hitting above R2 upside target.

Source: Hong Leong Investment Bank Research - 16 Jun 2020