MARKET REVIEW

Global: Asian markets were mostly lower Monday as investors monitored EU talks about a proposed E$750bn pandemic recovery fund and coronavirus cases continued to soar in the U.S. Meanwhile, China’s SHCOMP rallied 3.1% to 3314 after regulators maintained its benchmark lending rate for the 3rd straight month (as 2Q20 GDP topped estimates) and moved to bolster the market by lifting equity investment cap for insurers and encouraging M&A among brokerages and mutual fund houses. Wall St ended higher overnight as investors focused on positive developments from coronavirus vaccine candidates and talks in Washington on fresh stimulus amounting to US$1.0-$1.5T package, helped investors look beyond spiraling new cases of the disease. Apple, IBM, Intel, Amazon and Microsoft provided the biggest boosts to the Nasdaq (+2.5% to fresh record 10767) and S&P500 (+0.84% to 3252) as well as lifted the Dow 9 pts higher at 26681 after slipping as much as 167 pts.

Malaysia. In a volatile session, KLCI lost 6.9 pts to finish at 1589.5, after fluctuated within an intra-day high of 1609.0 and a low of 1580.4, led by selldown in banking and telco stocks whilst glove shares remained in the limelight after Topglove (BI: 2 for 1) and Supermax (BI 1 for 1) announced bonus issues. Trading volume increased to a fresh new high at 12.5bn shares worth RM6.64bn as compared to Friday’s 9.50bn shares valued at RM5.85bn. Market breadth was negative with 506 gainers as compared to 592 losers.

TECHNICAL OUTLOOK: KLCI

After hitting a low of 1476 (29 June), KLCI staged a 141-pt relief rally to a 6M high at 1617 (14 July) before retreating lower again to 1589.5 yesterday. Overall, current consolidation mode would prevail and is healthy to neutralize overbought technical momentum for a more sustained uptrend going forward. Key resistances are near 1600, 1617 and 1632 (upper BB) whilst supports fall at 1563 (17 July low), 1545 (30D SMA) and 1530 (LT downtrend line from 1896) levels.

MARKET OUTLOOK

Escalating fears about a Covid-19 2nd wave infections, which could worsen if a vaccine is not found before the winter, could continue to keep the glove stocks in the limelight despite the rich valuations. With Top Glove and Hartalega collectively contributing about 12% of the FBMKLCI’s market capitalisation as at yesterday, volatility in their share prices will continue to influence KLCI short term performance. Overall, current market consolidation mode would prevail and is healthy to neutralize overbought technical momentum for a more sustained uptrend going forward. Key resistances are near 1600, 1617 and 1632 (upper BB) whilst supports fall at 1563 (17 July low), 1545 (30D SMA) and 1530 (LT downtrend line from 1896) levels.

Source: Hong Leong Investment Bank Research - 21 Jul 2020