MARKET REVIEW

Global: Erasing much of an initial rise following the overnight rally on Wall St, Asia markets ended lower on profit-taking amid spiking Covid-19 outbreaks dented hopes for a global recovery, as worries of potential resumption of lockdowns could choke off ongoing budding economic recovery. Overnight, the Dow plunged 397 pts or 1.51% to 25890 as looming pandemic uncertainties are threatening the pace of the US recovery as some states roll back business reopenings. The sentiment was also dampened by Dr. Fauci’s warning that the US is now seeing “the consequence of community spread”, which is even more difficult to contain. Meanwhile, the Nasdaq fell 89 pts to finish at 10343 after carving out an intraday 10519 record.

Malaysia. In tandem with an overnight rally on Wall St and expectations of further OPR cut in BNM meeting yesterday (and BNM did slash OPR by 0.25% to a record low 1.75%), KLCI jumped as much as 10.7 pts to a high of 1587.6 (marginally below our envisaged 1591 target). However, strong profit-taking following a 100-pt surge in the last six consecutive days saw the index tumbling 24.7 from the day high to finish 10.2 pts lower at 1566.7. Trading volume lowered to 7.8bn shares valued at RM4.9bn against Monday’s 8.7bn shares worth RM5.07bn. Market breadth was bearish with 428 gainers against 648 losers.

TECHNICAL OUTLOOK: KLCI

After Surging 112 Pts From 1476 (29 June l Ow) to An Intraday High of 1587 yesterday (marginally below our envisaged 1591 target), KLCI finally made a U-turn to end 10.2 pts lower at 1566.7, still hovering above the 1548 uptrend line support from March Covid-19 low of 1208. In our view, as long as this support is not violated, the short term uptrend likely still has legs in the near term, after undergoing some sideways consolidation ahead of the Parliament resitting on 13 July. Key resistances are 1591 (9 June high) and the long awaited 1600 psychological barrier. On the flipside, breaking the 1548 support would witness further selling pressure towards 1530 (LT downtrend line from 1896) and 1509 (200D SMA) levels.

MARKET OUTLOOK

Taking cues from an overnight pullback on Dow and a failure to surpass the stiff 1591 resistance could see the KLCI to engage in a healthy short term consolidation mode ahead of the Parliament resitting on 13 July, after rallying from a low of 1476 (19 June) to a high of 1587 yesterday. Critical near term supports are situated at 1548 (uptrend line support from March Covid-19 low of 1208) and 1530 (LT downtrend line from 1896).

CLOSED POSITION

Yesterday, we had squared off our position on ADVCON (11.1% gain)

Source: Hong Leong Investment Bank Research - 8 Jul 2020