MARKET REVIEW

Global: Following the overnight rebound on Wall St and extended 8-day rally on China’s SHCOMP, fuelled by liquidity, policy support and retail investor enthusiasm, Asian markets ended mostly higher despite concerns of resurgence in virus infections worldwide. Despite lower weekly jobless claims to a near 4M low, the Dow tumbled as much as 544 pts intraday before narrowing the losses to end 361 pts lower at 25706 whilst the Nasdaq closed at another record high (+55 pts to 10548) as investors bet on big tech to weather the virus storm. Sentment was cautious ahead of the S&P 500 2Q20 reporting season next week (consensus predict a 40% YoY slump) and concerns that another round of business shutdowns to contain a surge in Covid-19 cases will derail the knotty economic recovery.

Malaysia. On the back of a fresh liquidity-driven buying after BNM cut OPR by 0.25% to 1.75% on 7 July (below the GFC low of 2.0%) and active buying interests on glove and banking stocks, KLCI rose as much as 7.4 pts to our envisaged 1591 upside target but strong profit-taking (after rallying from a low of 1476 on 19 June) saw the index erasing all the gains to end 0.3-pt lower at 1583.3. Trading volume decreased to 10.24bn shares worth RM5.18bn as compared to Wednesday’s 11.81bn shares worth RM4.36bn. Market breadth was positive with 537 gainers as compared to 496 losers.

TECHNICAL OUTLOOK: KLCI

After surging 115 pts from 1476 (19 June low) to 1591 intraday hgih yestesday, strong profit-taking saw the index to end flat at 1583.3. In our view, as long as the 1560 uptrend line support from 1208 is not violated, the ongoing short term positive run is expected to continue with key resistances remaining at 1591 and 1600 psychological barrier, followed by 1617 (30 Dec high). On the flipside, breaking the 1560 support would witness further selling pressure towards 1533 (LT downtrend line from 1896) and 1509 (200D SMA) levels.

MARKET OUTLOOK

Taking cues from another pullback on Dow and Brent oil prices overnight and ahead of the Parliament resitting on 13 July, KLCI is likely to trend sideways today with key resistances near 1590-1600 while supports fall on 1575-80 zones.

Source: Hong Leong Investment Bank Research - 10 Jul 2020