MARKET REVIEW

Global: Led by heavy losses in Japan (-2.3%), Korea (-1.9%), and Australia (-1.5%), most Asian markets were in negative territory as optimism about a quick economic comeback has been tempered by more global cases of the coronavirus. The sentiment was also dampened by China’s impending national security law in Hong Kong. Despite spiking coronavirus cases in the US and states attempt to reopen from the shutdown, the Dow staged a 580-pt or 2.3% technical rebound to 25596, helped by a strong May pending home sales and a 14.4% surge in Boeing’s stock, as certification flights for the Boeing 737 Max began Monday. The sentiment was also boosted by growing expectations that more stimulus measures are likely to be announced in the coming weeks as Powell warned that a recovery path is ‘extraordinarily uncertain’ amid efforts to control the virus.

Malaysia. Bucking lower regional markets, KLCI rose 6.3 pts at 1494.4, as sentiment was boosted by the hope of mid-year window dressing activities and Bursa/SC’s decision last Friday to prolong the short-selling suspension (from 30 June to 31 Dec 2020), after fluctuating between an intra-day high of 1495 and a low of 1476.2. Trading volume increased to 6.02bn shares worth RM3.05bn as compared to Friday’s 4.73bn shares worth RM2.38bn. Market breadth was negative with 371 gainers as compared to 662 losers.

TECHNICAL OUTLOOK: KLCI

After hitting a peak at 1591 (9 June) from a Covid-19 bottom 1208 (19 Mar), KLCI had surrendered back 89 pts or 5.6% to close at 1502 yesterday, breaking below the major supports of 1533 (LT resistance trend line drawn from 1896 high), 1523 (uptrend line support from 1208 low) and 1511 (200D SMA) levels. Taking cue from the wild swings in the global markets, KLCI is likely to consolidate lower in the coming days. A decisive breakdown below the immediate 1467 (lower BB) support would point to a deeper consolidation towards 1450 (100D SMA) and 1438 (100D SMA) territory.

MARKET OUTLOOK

Today, hope for a mid-year window dressing and a highly welcomed measure by Bursa/SC last Friday to prolong the short-selling suspension (from 30 June to 31 Dec 2020) coupled with overnight rebound on Wall St are likely to boost KLCI to march further towards 1500 zones. However, barring a decisive recapture above the key 1511 (200D SMA) resistance level, the odds are still favour for KLCI to consolidate further in the near term amid concerns over the possibility of an aggressive 2nd wave Covid-19 surge in global hotspots and uncertainty in the local political scene.

For stock pick, PECCA (RM0.895-BUY-RM1.28 TP) gained 2 sen yesterday amid news that it will venture into PPE business. Technically, the stock will turn more positive to advance to RM1.03-1.13 zones if the stiff downtrend line resistance from RM1.27 (27 Nov 2019) is taken out decisively. Key supports are situated at 0.80 -0.865 with cut loss at RM0.78 levels. Meanwhile, ADVCON (RM0.36-Not rated) may attract bargain hunting on any further fall as valuations become undemanding after sliding 24% from 52-week high at RM0.475. A successful breakout above RM0.375 will lift share prices hi gher towards mid to long term RM0.41-0.475 levels. Key supports are situated at RM0.33-0.345 while cut loss at RM0.32.

Source: Hong Leong Investment Bank Research - 30 Jun 2020