MARKET REVIEW

Global: In tandem with a sluggish Wall St overnight, Asian stock markets ended lower last Friday amid worries over spiking Covid-19 infections worldwide could derail a fragile economic recovery. Sentiment was also dampened by heightened US-China geopolitical tensions after China said that it would impose reciprocal sanctions against US officials after the US imposed sanctions on individuals and institutions for human rights abuses of Uighurs, a mostly Muslim ethnic minority living in China’s Xinjiang province.

Last Friday, Wall St ended higher as positive analysis from Gilead Sciences experimental remdesivir therapy to reduce the risk of mortality in Covid-19 patients helped to soothe investor worries over a record rise in coronavirus cases in the US. The Dow rallied 369 pts to 26075 (+1% WoW) whislt the Nasdaq surged 70 pts to 10617 (+4% WoW), its 27th record of 2020.

Malaysia. In wake 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 strong buying interests on selected index-linked glove, plantation and O&G stocks, KLCI jumped 8.6 pts to finish at 1591.8 (+39.4 pts WoW), surpassing the previous high of 1590.8 on 9 June. Trading volume decreased to 8.7bn shares worth RM5.04bn as compared to Thursday’s 10.24bn shares valued at RM5.18bn. Despite the headlines gain, market breadth was negative with 425 gainers vs 657 losers as investors remained cautious ahead of the parliament resitting on 13 July.

TECHNICAL OUTLOOK: KLCI

After hitting a low of 1553 on 6 July, KLCI continued to gain further strength to end at weekly high of 1592 last Friday, recording its 2nd consecutive gains (+39.4 pts WoW). In our view, the strong closure above 1562 uptrend line support from 1208 and bullish technical indicators bode well for the benchmark to advance towards 1600 psychological barrier and 1617 (30 Dec high) before a mild pullback taking place. Fomidable resistances are situated at 1647 (30M SMA) and 1680 (200W SMA). On the flipside, breaking the 1562 support would witness further selling pressure towards 1533 (LT downtrend line from 1896) and 1509 (200D SMA) levels.

Source: Hong Leong Investment Bank Research - 13 Jul 2020