MARKET REVIEW

Global: Asian markets ended higher, tracking gains from the Dow overnight after the Fed widened its bond-buying program. The sentiment was also lifted by confidence in Beijing’s capability to control the latest resurgence of coronavirus cases and expectations of a US China meeting in Hawaii. On Wall St, the Dow rallied as much as 848 pts to 26611, as investors cheered a Bloomberg report outlined Trump administration plans for a US$1 trillion infrastructure spending package, robust May retail sales, and industrial production data as well as the progress on the development of potential therapeutic drugs on Covid-19 patients. However, the gains were pared down to 527 pts at 26290 amid a resurgence of new COVID-19 cases in China, the US, and Brazil and pessimistic economic outlook by Powell in his testimony before Congress.

Malaysia. Tracking bullish Wall St and regional markets, KLCI soared as much as 30 pts to 1528.8 before narrowing the gains to 18.9 pts at 1517.7 (a tad above 200D SMA), led by renewed buying interests on gloves and tourism-related stocks. Trading volume decreased to 7.97bn shares worth RM4.14bn as compared to Monday’s 9.07bn shares worth RM5.32bn. Market breadth was positive with 947 gainers as compared to 175 losers.

TECHNICAL OUTLOOK: KLCI

Although KLCI recovered 18.8 pts at 1517, a tad above the 200D SMA (now at 1516), the technical outlook has turned increasingly negative following a decisive breakdown below the LT downtrend support near 1543 after a 47-pt carnage on 15 June. Near term, consolidation will prevail unless the 1543 (support-turned-resistance) levels is taken out successfully. On the other hand, failure to hold above 1516 and 1500 levels could witness renewed selldown towards 1490 (15 June low), 1473 (uptrend line from 1208), and 1457 (30D SMA) zones.

MARKET OUTLOOK

Taking cue from recent relief rally in Wall St, KLCI is likely to continue its technical rebound from 15 June low of 1490 to retest key LT downtrend resistance at 1543. Nevertheless, domestic uncertainties due to potential snap election in 2H20 and lifting of short-selling ban post 30 June may dampen sentiment and cap further rally. Meanwhile, news of NFOs to resume operations today since the MCO on 18 March are likely to draw some trading interests on Bjtoto (~7% FY21E DY; resistance RM2.47-2.60) and Magnum (~5.4% FY21E DY; resistance RM2.50-2.60).

Source: Hong Leong Investment Bank Research - 17 Jun 2020