MARKET REVIEW

Global: Asian markets were mostly lower Friday as investors weighed the hope for an eventual agreement on a US stimulus package against heightened US-China geopolitical tension following the latest planned US ban on major Chinese apps. Investors were also awaiting a US report on jobs at 8.30pm on 7 Aug for another gauge of the economic fallout from the coronavirus pandemic. Last Friday, the Dow added 46 pts to 27433 (+3.8% WoW) amid a better-than-forecast July jobs data. However, stalled talks among lawmakers on the next virus relief package and fear of surging Covid-19 cases and rising US-China tension threatened to stifle growth and dampened investor’s optimism.

Malaysia. KLCI lost 10.4 pts to 1578.1 (-25.6 pts WoW), led by selloff in the technology, healthcare and financial stocks. Despite KLCI woes, trading volume and value reached dizzying heights with 26.65bn shares (with the top 5 accounted about 40% of the t rades) toworth RM9.04bn as compared to Thursday’s 16.69bn shares worth RM8.56bn. Market breadth was negative with 435 gainers as compared to 794 losers.

Foreign (-RM85m) and local institutional investors (-RM156m) were the net sellers whilst local retailers were the net buyers with RM241m or capturing 51.3% daily participation rate (vs local insti 40.4%/ foreigners 8.4%). YTD, foreigners sold RM20.6 bn 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 29 pts higher to 1578 last Friday, neutralising previous overbought positions. We reiterate our view that unless a successful breakout above key rounding tops hurdles situated at 1591 (9 June) and 1618 (28 July), an extended range bound consoliation mode is likely to stay for a while in wake of the ongoing domestic political uncertainty and August reporting season, the increasing numbers of new Covid-19 clusters, and intensi fied US-China geopolitical tension. Key supports are situated at 1565 (30D SMA) and 1549. Breaking below 1549 will confirm that the bears are in control to drive index lower towards 1511 (200D Sm) and 1500 zones.

MARKET OUTLOOK

Following the frenzy and irrational buying last few days, we expect penny stocks, ACE and lower liners to succumb to heavy profit taking activities and dampen broader market sentiment. Confidence could be further affected in wake of ongoing domestic political uncertainty, subdued August reporting season and sluggish 2Q20 GDP, resurgence of Covid-19 cases and intensified US-China geopolitical tension. Weekly supports are situated at 1549-1565 whilst resistances are pegged at 1591-1600 levels. CLOSED POSITION (FIG1) In wake of the uncertaitnies, we had squared off our positions on ROHAS (3.7% loss).

Source: Hong Leong Investment Bank Research - 10 Aug 2020