MARKET REVIEW

Global: In tandem with higher Wall St, Asian market ended higher last Friday, with banks leading the rally after US regulators’ decision to ease some rules that limit banks’ ability for complex trading and investment portfolios. Sentiment was also boosted by hopes that whether US lawmakers are likely to push through more fiscal stimulus measures in coming weeks, offseting investor jitters over alarming increases in new coronavirus cases. Last Friday, the Dow slid 730pts to 25015 as authorities were forced to backtrack on reopening their economies amid soaring cases in hospitalizations and deaths. Meanwhile, banks shares tumbled as investors parsed the results of the Fed’s bank stress tests which resulted in a cap on dividends and stock buybacks.

Malaysia. KLCI eased 1.1 pts to 1488.1 after hovering within a range of 12.5 pts between an intra-day high of 1495.6 and a low of 1483.1 amid local political uncertainty and awaiting the Bursa/SC decision on the short-selling ban post 30 June. Trading volume increased to 4.73bn shares worth RM2.38bn as compared to Thursday’s 4.49bn shares valued at RM2.49bn. Market breadth was negative with 330 gainers as compared to 590 losers.

TECHNICAL OUTLOOK: KLCI

After hitting the peak at 1591 (9 June) from a Covid-19 bottom 1208 (19 Mar), KLCI had surrendered back 103 pts or 6.5% to close at 1488 last Friday, violating multiple major supports at 1540 (LT resistance trend line drawn from the 1896 high), 1520 (20D SMA and uptrend line support from 1208) and 1511 200D SMA levels. In wake of the negative Wall St as investors grapple with the virus resurgence risks, KLCI is likely to extend its consolidation in the coming days. A decisive breakdown below the immediate support at 1465 (lower BB) would point to a deeper consolidation towards 1447 (50D SMA) and 1438 (100D SMA) territory.

MARKET OUTLOOK

Barring a successful reclaim above the key 1500 and 1511 (200D SMA) resistance levels, the odds are still favour for more consolidation ahead amid concerns over the possibility of an aggressive 2nd wave Covid-19 surge in global hotspots and uncertainty in the local political scene. Nevertheless, hope for a mid-year window dressing and Bursa/SC decision in extending the short selling ban until 31 Dec are likely to cushion further slide with key supports at 1438-1465 levels. 

For stock pick, KUB (Not-rated, RM0.415) short to mid term technical outlook has turned positive following a successful breakout above the formidable 200W SMA resistance at RM0.395 last week. Further upside targets are RM0.44 (LT downtrend line from RM0.64 in March 2017) and RM0.50 psychological barrier. Key supports are situated at RM0.38-0.395 with cut loss at RM0.38. 

To recap, Datuk Seri Johari Abdul Ghani (an ex-Deputy FM) emerged as KUB’s largerst shareholder last April after he bought 32% stake at 68sen/share from Anchorscape Sdn Bhd, a special-purpose vehicle related to political party Umno. Currently, the stock is trading at 31% below its 1Q20 BVPS of RM0.60, supported by netcash about RM266m or RM0.47/share (March netcash RM28 and RM238m disposal proceeds) after selling 2,656ha plantation assets in Kluang, Johor for RM158m and a 40% stake in KUB-Berjaya Enviro for RM80m to unlock value for future growth.

Source: Hong Leong Investment Bank Research - 29 Jun 2020