MARKET REVIEW

Global: Awaiting the approval of a fresh US coronavirus relief package, Asian markets ended mixed amid existing woes about economic fallout from coronavirus resurgence, with US Fed policymakers saying surging Covid-19 cases is slowing recovery in the world’s largest economy. Sentiment was also dampened by heightened US-China conflict as Trump said it would step up efforts to purge “untrusted” Chinese apps from US digital networks and called the TikTok and WeChat “significant threats”.

Overnight, the Dow soared 185 pts to 27387 to extend its 5th winning streak as the technology sector built on its momentum coupled with optimism that lawmakers pledged to keep working on another coronavirus financial-aid package and President Donald Trump said he could issue executive orders on some relief measures. Sentiment was also boosted by a lower-than-expected weekly US jobless claims, ahead of the crucial July jobs report tonight.

Malaysia. KLCI surged 20.4 pts to 1588.6, led by gains in the finance, energy, plantation, healthcare and consumer products indices. Trading volume showed another record high at 16.69bn shares worth RM8.56bn as compared to Wednesday’s 15.56bn shares valued at RM8.27bn, spurred by robust buying interests on the ACE market, healthcare and technology stocks. Market breadth was positive with 716 gainers as compared to 468 losers.

Yesterday, the foreign (-RM90m) and local institutional investors (-RM119m) were the net sellers whilst local retailers were the net buyers with RM209m or capturing 47.6% daily participation rate (vs local insti 43.9%/ foreigners 8.5%). YTD, foreigners sold RM20.6bn shares compared with purchases by local institutional funds (RM10.8bn) and retailers (RM9.8bn).

TECHNICAL OUTLOOK: KLCI

After plunging 69 pts from a 7M peak from 1618 (28 July) to a low of 1549 on 4 Aug, KLCI has rebounded steadily to end 39 pts higher to 1588 yesterday, neutralising the previous overbought positions and indicators are now on the mend. However, unless a successful breakout above key rounding tops hurdles at 1591 (9 June) and 1618 (28 July), an extended range bound consoliation mode is likely to stay for a while in wake of ongoing domestic political uncertainty and August reporting season, a resurgence of Covid-19 cases and intensified US-China geopolitical tensions.

MARKET OUTLOOK

Despite a strong 39-pt recovery from 1549 low after tumbling 69 pts from 7M high of 1618 (28 July), an extended range bound consoliation mode is likely to stay for a while in wake of ongoing domestic political uncertainty and August reporting season, a r esurgence of Covid19 cases and intensified US-China geopolitical tensions. Only a successful breakout above rounding tops resistances at 1591 (9 June) and 1618 will lift the index to higher targets to 1655 (weekly upeer BB) and 1678 (200W SMA) levels.

On stock selection, HSSEB (RM0.525, Not-rated) is principally involved in the provision of engineering and project management services for urban infrastructure, transportation planning, roads and highways, railways and metro systems, water resources and supply, waste management, building and structures and power generation. Prospects are good for HSSEB, backed by RM560m orderbook end March (likely to last for another 2-3 years) to win contracts if the government decides torevive the KL-Singapore High Speed Rail (HSR) and Klang Valley MRT Line 3 (MRT3) projects.

To recap, on 13 July 2020, its Group CEO Dato’ Nitchiananthan Balasubramaniam was appointed by the Minister of Works as a Board Member (Special Interests Representative) of Malaysia Highway Authority (LLM) for a 2-year period.

Technically, the stock is poised for a sideways consolidation breakout in the near term, pending a successful breakout above RM0.55 (upper BB). Higher upside hurdles next are RM0.57 (6 July high) and RM0.65 (200D SMA) whilst supports are pegged at RM0.485- 0.50. Cut loss at RM0.475

Source: Hong Leong Investment Bank Research - 7 Aug 2020