MARKET REVIEW

Global: Asian markets ended mildly higher as sentiment was boosted by Beijing’s pledge of fresh reforms and ample financial liquidity to bolster its economy and capital markets, pushing investors to look past a threat from prevailing US-China tensions and the WHO’s warning that the coronavirus pandemic has entered a “new and dangerous phase”. News of the Fed buying corporate bonds along with a record spike in U.S. retail sales spurred the Dow to soar as much as 371 pts in the early trade. However, the index reversed to end 208 pts lower at 25871 due to the steady negative coronavirus news flow and coincided with the quadruple witching, which typically translates into elevated volume and volatility.

Malaysia. On the back of improving sentiment due to higher Brent oil and FCPO prices, KLCI inched up 2.4 pts at 1507.3, lifted by active buying interests on Petdag, Top Glove and Harta. Trading volume increased to 6.3bn shares worth RM4.9bn as compared to Thursday’s 5.1bn shares worth RM3.8bn. Market breadth was positive with 610 gainers as compared to 400 losers.

TECHNICAL OUTLOOK: KLCI

The KLCI inched up 2.4 pts last Friday but still tumbling 38.8 pts lower WoW to 1507.3 (its 2nd consecutive decline) due to the fluidity of quick economic recovery after the easing of coronavirus-induced lockdowns as well as the resurgence of coronavirus infections worldwide. In reaction to the increasingly negative outlook after falling below the 1514 (200D SMA) and 1543 (LT support-turned-resistance) levels, KLCI’s near term consolidation will prevail with key support at 1490 (15 June low and uptrend line support from Covid-19 bottom 1208) and 1470 (30D SMA).

MARKET OUTLOOK

After tumbling 38.8 pts WoW and recording its 2nd weekly decline due to the fluidity of quick economic recovery as well as the resurgence of coronavirus infections worldwide, coupled with the domestic uncertainties from the uplifting of short-selling ban post 30 June and potential snap election in 2H20, KLCI is likely to stuck in short-term consolidation mode. Nevertheless, we expect the start of mid-year window dressing activities to cushion selloff with key supports at 1470-1490 levels whilst resistances fall at 1514-1543 zones.

Meanwhile, news of Penang will go ahead with its mega projects under the RM46bn Penang Transport Master Plan (PTMP) and also the RM100m Penang Hill cable car project even without funding from the Federal Government are likely to draw some attention. The PTMP project, which was announced in 2015, comprises a light-rail transit (LRT) system, an undersea tunnel and three paired highways. The SRS Consortium is the project delivery partner (PDP) that will execute the masterplan, which comprises Gamuda, Loh Phoy Yen Holdings Sdn Bhd and Ideal Property Development Sdn Bhd (60:20:20), with Bayan Lepas Komtar LRT (~RM9-10bn) and the Pan-Island Link (PIL worth RM9bn) will take priority. To recap, PTMP is a 20-year initiative by the Penang state government to implement various projects to improve the public transportation system in the state. According to The Star in 2019, over RM70bn is expected to be raised from the sale of the three man-made islands under the the Penang South Reclamation (PSR) project.

We see potenital trading interests on the PDP and reputable contractors (i.e. Gamuda, IJM, Suncon) as well as marine construction/reclaimation specialists (i.e. Benalec, Kerjaya).

Source: Hong Leong Investment Bank Research - 29 Jun 2020