MARKET REVIEW

Global: Tracking overnight fall on Wall St, Asian markets ended mixed amid virus resurgence could derail a bumpy economic recovery and heightened South China seas crisis that could escalate into military conflicts after US Secretary of State Mike Pompeo said there was no legal basis for China's claims on the Sea and accused Beijing of using intimidatory tactics against other claimant states.

The Dow dropped 62 pts to 26672 (+2.3% WoW) as investors weighed on the disappointing consumer sentiment data in July and the prospects for additional fiscal stimulus in the US (as the earlier ~US$2 trillion pandemic package will end in July) while Covid-19 cases continue to climb to a single-day record high of more than 70,000 cases.

Malaysia. After slipping 12.1 pts on Thursday due to technical glitch on Bursa Malaysia and a selloff on glove stocks (following US CBP’s detention on disposable gloves manufactured by Topglov’s two subsidiaries), KLCI staged a strong 23-pt relief rally last Friday to end at 1596.3 (+4.5 pts WoW), underpinned by recovery on glove stocks after Top Glove’s

management expects the issue to be resolved within 2-4 weeks and the prospects for this detention order being lifted are high as the market is experiencing an acute shortage and other manufacturers’ capacity is fully sold until June-21. Trading volume increased to 9.29bn shares valued at RM4.21bn against Thursday’s 9.28bn shares worth RM4.14bn. Market breadth was positive with 695 gainers as compared to 349 losers.

TECHNICAL OUTLOOK: KLCI

Following the bullish Marubozu candlestick and a strong reclaim above the 10D SMA (near 1586) and 1591 (9 June high) levels, we may witness further momentum recovery this week but upside could be capped near 1617 (14 July high) and 1629 (upper BB) territory as indicators are getting overbought. On the flipside, a decisive close below 1586 and 1563 (17 July low) will trigger more selldown towards 1544 (30D SMA) and 1533 (LT downtrend line from 1896) levels.

MARKET OUTLOOK

Tracking overnight Dow’s and oil prices retracements coupled with heightened US-China geopolitical tensions and expectations of persistent volatily on glove stocks amid heavy deliveries on retail transactions following the recent surge, KLCI is likely to witness choppy pattern this week. Key supports are situated at 1563-1544 whilst resistances are pegged at 1617-1629 levels.

Source: Hong Leong Investment Bank Research - 20 Jul 2020