MARKET REVIEW

Global: Asian markets ended mostly higher, led by a 1.4% rally in SHCOMP to a 4M high at 3026, helped by the central bank’s move on rate cuts, and improving June factory data. However, overall sentiment turned cautious on gloomy BOJ tankan survey and Hong Kong citizens took to the streets as China began enforcing a sweeping security law on 1 July. The Dow jumped as much as 206 pts to 26019 after positive vaccine developments from Pfizer and BioNtech SE and better-than-expected manufacturing data. However, the index reversed 284 pts to end 78 pst lower at 25735 amid concern that worsening Covid-19 tally in the US could trigger another round of business lockdowns.

Malaysia. Tracking higher regional markets, KLCI soared 13.5 pts at 1514.4 to record its 3rd straight gains, boosted by a strong rebound in Malaysia June PMI data coupled with active buying interests on index-linked Topglove and Harta due to virus resurgence. Trading volume increased to 7.33bn shares worth RM3.60bn as compared to Tuesday’s 5.35bn shares worth RM3.74bn. Market breadth was positive with 660 gainers as compared to 313 losers.

TECHNICAL OUTLOOK: KLCI

After peaking at 1591 (9 June) from Covid-19 bottom 1208 (19 Mar), KLCI had surrendered as much as 115 pts to 1476 (29 June low) before gradually narrowing the losses to 77 pts or 4.8% at 1514 yesterday. Given that KLCI is now above the 200D SMA (or 1510) and supported by bottoming up indicators, the index is likely to retest the 1530 (LT downtrend line drawn from 1896 high) and 1546 (38.2% FR) levels soon. On the flipside, violating 1510 support would likely send prices lower again towards the 1500 and 1482 (30W SMA) levels.

MARKET OUTLOOK

Following a highly welcomed measure by Bursa/SC last Friday to prolong the short-selling suspension to 31 Dec 20 and a positive close above 200D SMA supported by bottoming up indicators, KLCI is expected to advance further to retest the key 1530 (LT downtrend line drawn from 1896 high) and 1546 (38.2% FR) barriers. However, a pullback could ensue triggered by rising Covid-19 count globally, souring US-China relations, domestic political uncertainty with the focus on Parliament re-sitting on 13 July and deteriorating 2Q corporate results.

On stock selection, HTPADU (Not-rated, RM1.04) could attract buying interests after MYEG (Not-rated, RM1.52) received a three-year extension from the Government to provide the foreign worker temporary employment pass online renewal service worth an estimated RM208m. To recap, Asia Internet Holdings (owned by MYEG co-founder Wong Thean Soon and Chairman Datuk Noraesah Mohamad) held a 10.4% stake in HTPADU. According to the Edge Malaysia (22-28 June), MYEG-HTPADU-S5 consortium is the frontrunner for the multi-billion ringgit National Integrated Immigration System (NIIS) project.

Technically, HTPADU is expected to stage a downtrend line breakout near RM1.08 to advance further towards RM1.18-1.24 in the short to medium term. Supports are RM0.97- 1.00. Cut loss at RM0.955.

Source: Hong Leong Investment Bank Research - 2 Jul 2020