MARKET REVIEW

Global. Asia markets had broadly tailed S&P and Nasdaq fresh record closings, amid a rush to large-capitalization technology and e-commerce shares for safety. Pfizer and BioNTech said that they are track to submit a Covid-19 vaccine candidate as early as October also boosted sentiments, overshadowed nagging US-China trade tension after Trump declined to acknowledge any plans to meet with China over the Phase 1 trade deal.

The Dow jumped 190 pts to 27930 whilst the S&P (+12 pts to 3397) and Nasdaq (+47 pts to 11312) closed at another record highs following stronger-than-expected August’s manufacturing and services PMI reports coupled with positive vaccines development news from Pfizer and Johnson & Johnson.

Malaysia. In a volatile fashion, KLCI inched up 1.7 pts at 1577.1 after traded within a range of 13.7 pts between an intra-day high of 1584.4 and a low of 1570.7. Notable losses were seen on GENTING (-23 sen to RM3.57), GENM (-8 sen to RM2.22), RHBBANK (-8 sen to RM4.80) and MAYBANK (-RM0.096 to RM7.55) following the news that cruise ship operator Genting HK had suspended all payments to creditors. Trading volume decreased to 7.73bn shares worth RM5.02bn as compared to Wednesday’s 8.56bn shares valued at RM7.01bn. Market breadth was positive with 708 gainers vs 390 losers, aided by a resurgence in uptrend from the FBM70 (+1.63%), FBMSCAP (+1.23%) and ACE (+6.23%).

Foreign investors were back in selling mode for the 3rd straight sessions, disposing off RM193m net of local equities whilst the local retailers (RM140m) and institutional investors (RM53m) turned net buyers. YTD, foreigners net sold RM19.8bn shares compared with net purchases by local institutional funds (RM9.8bn) and retailers (RM10bn).

TECHNICAL OUTLOOK: KLCI

From a 7M peak of 1618 (28 July), KLCI plunged as much as 79 pts to 1539 (12 Aug low) before consolidating higher to end at 1577.1 on 21 Aug (+12.5 pts WoW). We reiterate that as long as KLCI can close above 1560 (50D SMA), chances for the benchmark to recover further towards 1584 (30D SMA), 1591 (9 June high) and 1600 remain favourable, as MACD is about to confirm its positive crossover now while RSI and slow stochastic indicators are hooking up. Conversely, failure to hold at 1560 will attract more downward consolidation to lower supports at 1539 and 1511 (200D SMA) levels

Daily KLCI Chart: Range Bound Consolidation

MARKET OUTLOOK

This week, we expect KLCI to remain range-bound with key supports at 1550-1560 whilst resistance falls on 1591-1600 as we enter the final leg of August reporting season. Although the jury is still out on whether the party is already over amid ongoing tug of war between the bulls and bears, the market undertone is likely to stay firm with strong rotational interest into the technology, healthcare, energy, small & midcaps, and ACE companies after last week’s consolidation (daily average trading activity moderated to 8.9bn shares last week against the preceding week’s 17.8bn shares).

On stock selection, after plunging 48.3% from an all-time high of RM0.60 (5 Aug) to a low of RM0.31 (12 Aug), ASIAPLY (RM0.43, Not-rated) will be attractive to bargain on any price weakness towards the 0.39 (uptrend line support) and RM0.41 (30D SMA) supports levels. To recap, the group is engaged in the manufacturing of cast acrylic sheets, used mainly in automotive and transportation, signage & displays, sanitary wares, architectural designs, interior design, etc. In the wake of the Covid-19 pandemic, acrylic sheets are widely installed in shops, restaurants, offices, hospitals, and other common spaces to prevent virus transmissions and social distancing purposes. In its 2Q20 results review, management is confident that FY2020 will be a strong growth year following promising orders from new customers from the USA and Europe (due to trade diversion from China to Malaysia).

We believe the current consolidation phase could have been exhausted (technical indicators are on the mend) and a successful breakout above mid BB at RM0.45 will spur prices higher towards RM0.49 (61.8% FR) and our LT objective of RM0.53 (76.4% FR) levels. Cut loss at RM0.38.

Daily ASIAPLY: Uptrend is intact; More upside if staging a strong breakout above mid BB at RM0.45

Source: Hong Leong Investment Bank Research - 24 Aug 2020