MARKET REVIEW

Global: In sync with a strong rebound on Wall St, Asian markets ended higher amid better than-expected economic data from the US May pending home sales and China’s June PMI, despite widening coronavirus outbreaks and growing US-China tensions after China’s parliament passed national security legislation for Hong Kong on Tuesday. Overnight, the Dow soared 217 pts to settle at 25813 (+1.7% in June & +17.8% in 2Q), as data showed a recovery in consumer confidence and higher home prices, offsetting concern about the rising number of new coronavirus cases in many American states. Sentiment was also boosted after testimony to Congress by Powell and Mnuchin that underscored an ongoing commitment to anchor the US economy through the virus pandemic, outweighing warnings by the WHO that “the worst is yet to come” with Covid-19 woes and Dr Fauci’s view that the US could see 100,00 new coronavirus infections a day.

Malaysia. KLCI jumped 6.5 pts to end at 1501 (+1.9% in June & +11.1% in 2Q), as sentiment was boosted by the mid-year window dressing activities coupled with active buying support on index-linked Topglove and Harta glove stocks due to virus resurgence and news that some brokers lifted the ceiling prices for its margin financing. Trading volume decreased to 5.35bn shares worth RM3.74bn as compared to Monday’s 6.02bn shares worth RM3.05bn. Market breadth was positive with 554 gainers as compared to 388 losers.

TECHNICAL OUTLOOK: KLCI

After peaking at 1591 (9 June) from Covid-19 bottom 1208 (19 Mar), KLCI had surrendered back 90 pts or 5.6% to close at 1501 yesterday, hovering below the major supports of 1533 (LT downtrend line drawn from 1896 high), 1530 (uptrend line support from 1208 low) and 1511 (200D SMA) levels. The 1511 resistance is likely to provide some resistance on the upside in the immediate term. Breaking this hurdle will spur the benchmark higher towards 1530-1533 levels. On the flipside, violating 1476 (29 June low) support would likely send prices lower towards the 1470 (10W SMA) and 1452 (50D SMA) levels next.

MARKET OUTLOOK

Following a highly welcomed measure by Bursa/SC last Friday to prolong the short-selling suspension (from 30 June to 31 Dec 2020) coupled with further recovery on Wall St, KLCI is expected to retest immediate resistance at 1511 or 200D SMA. Breaking this hurdle successful will lift KLCI further towards stiff 1533 (LT downtrend line from 1896) and 1550 resistances, given the heightened concerns over the possibility of an aggressive 2nd wave Covid-19 surge in global hotspots, US-China trade tension and uncertainty in the local political scene when Parliament resumes on 13 July.

Closed positions: Yesterday, we had squared off our positions in Edgenta (7.5% loss) and KAREX (0% gain).

Source: Hong Leong Investment Bank Research - 1 Jul 2020