Global: Asian markets advanced, boosted by signs of a recovery in the world's second largest economy, and hopes for a dovish message from the 2-day US FOMC meeting (29- 30 July) coupled with the proposed USD1 trillion coronavirus aid package proposed by Republicans. However, lingering US -China tensions and fresh flare-ups of coronavirus cases capped the rise. Overnight, the Dow finished 205 pts lower to 26379 while the Nasdaq Composite slid 134 pts to 10402 as investors monitored talks between Republicans and Democrats on a 2nd Covid-19 aid package of roughly USD1 trillion and focused to a deluge of 2Q20 results coupled with the Fed’s latest policy decision.

Malaysia. Tracking higher regional markets and a strong June trade surplus, KLCI jumped 18.5 pts to 1609.9, led by sustained buying interests in Topglov, Harta, Petdag, IHH and Hapseng. Trading volume increased to 11.9bn shares worth RM7.24bn as compared to Monday’s 11.6bn shares worth RM6.23bn. Market breadth was positive with 631 gainers as compared to 500 losers.

TECHNICAL OUTLOOK: KLCI

After hitting a 6M high at 1617 (14 July), KLCI was locked in a 46-pt range bound consolidation within 1563 (17 July low) and 1610 (20 July) levels before reclaiming above 1600 psychological levels yesterday. Overall, a breakout on either side would give us a clue on the near term direction. Breaking 1617 hurdle would open the door for higher targets at 1641 (weekly upper BB) and 1679 (200W SMA) zones. On the flip side, a sharp fall below 1563 would trigger further selloff to 1555 (30D SMA) and 1530 (50d SMA) territory.

MARKET OUTLOOK

In the short term, rotational buying interests in the technology, Covid-19 winners and GLC/political-linked stocks are expected to sustain the buoyant trading activities on Bursa Malaysia, thanks to the ample liquidity flush, outshadowing by subdued fundamentals such as tit-for-tat actions between the US and China, fluid domestic politics, rising new daily coronavirus cases, expectations of worsening reported numbers for 2Q20 (both GDP and corporate results), and growing speculation about GE15 by end 2020. Technically, a successful breakout above 1617 neckline resistance would spur index higher towards 1640-1650 zones whilst a sharp fall below 1563 would trigger further selldown at 1530- 1550 territory

Source: Hong Leong Investment Bank Research - 29 Jul 2020