MARKET REVIEW

Global: Unfazed by China’s retaliatory sanctions on 11 US citizens, Asian markets ended higher amid bets the US fiscal stimulus package will eventually be reached coupled with positive hopes ahead of a crucial round of trade talks this weekend. Overnight, the Dow jumped as much as 363 pts to 28154 following reports on easing Covid-19 infections and coronavirus-related hospitalizations coupled with the encouraging vaccine’s progress from Russia. Nevertheless, the index plunged 467 pts from the peak to end 104 pts lower at 27687 after a Republican leader said negotiations with Democrats were at a stalemate.

Malaysia. On the back of extended consolidation on blue chips, KLCI lost 6.9 pts to 1564.7 after traded within a range of 18 pts between an intra-day high of 1582 and a low of 1564. Trading volume jumped to another record high at 28bn shares worth RM7.8bn as compared to Monday’s 19.76bn shares valued at RM7.55bn, thanks to the robust rotational buying on ACE, oil & gas, healthcare, and technology-related stocks. Market breadth was negative with 483 gainers as compared to 722 losers due to broad-based profit-taking consolidation on lower liners and penny stocks after recent rallies and record volume.

Yesterday, foreign (-RM104m) and local institutional investors (-RM5m) were the net sellers whilst retailers were the net buyers with RM109m. YTD, foreigners sold RM20.36bn shares compared with purchases by local institutional funds (RM9.57bn) and retailers (RM10.79bn).

TECHNICAL OUTLOOK: KLCI

After plunging 69 pts from a 7M peak from 1618 (28 July) to a low of 1549 on 4 Aug, KLCI was locked in sideways consolidation before ending at 1565 yesterday, and grossly neutralised 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 consolidation mode is likely to prevail. Key supports are situated at 1556 (50D SMA) and 1549. Breaking below 1549 will confirm that the bears are in control again to trigger further slide towards 1511 (200D SMA) and 1500 zones.

MARKET OUTLOOK

Following Bursa’s recent frenzy and irrational trading volume lately, broader market sentiment is likely to remain subdued in the next few days amid extended profit taking consolidation particularly on penny stocks and lower liners. However, we reckon that rotational sectoral buying (eg energy, financial services, heathcare, technology ACE etc) will continue to keep overall trading volume buoyant.

Overall, there is no change to the general trend for the KLCI as it is still locked in a sideways band with a slight negative bias in wake of the ongoing domestic political uncertainty, a weak August reporting season, the increasing numbers of new Covid-19 clusters, and intensified US-China geopolitical tension. Key supports are situated at 1511- 1549-1556 whilst resistances fall on 1579-1591-1618 levels.

CLOSED POSITION (FIG1)

In wake of the extended market uncertainty, we took profit on HSSEB (10.5% gain) after hitting R2 upside target yesterday.

Source: Hong Leong Investment Bank Research - 18 Aug 2020