MARKET REVIEW

Global. Asian markets chalked up steady gains, supported by positive news that the Trump administration was considering fast-tracking an experimental Covid-19 vaccine from the UK and the FDA approval that uses blood plasma from recovered patients for Covid-19 treatment. Sentiment was also helped by easing US-China trade tension following news that trade talks resumed and both sides were committed to the success of the Phase One agreement.

Wall St ended mostly higher as the S&P 500 (+12 pts to 3443) and the Nasdaq Composite (+87 pts to 11466) notched fresh highs whilst the Dow slipped 60 pts to 28248, amid positive developments in US-China trade and fresh progress in the medical battle against the coronavirus pandemic. On the economics front, the Conference Board’s Consumer Confidence index plunged to a 6-year low in August while the sales of new homes in July surged to a 13-year high.

Malaysia. In contrast to the higher regional markets. KLCI tumbled 13.6 pts to record its 2nd straight losses, mainly weighed down by TOPGLOV (-10.5 index pts) and HARTA (-5.3 index pts) as progressive progresses on vaccines’ development triggered strong profit taking selloff. Trading volume increased to 10.2bn shares valued at RM7.6bn against Monday’s 10bn shares worth RM5.8bn. Market breadth was bearish with 323 gainers as compared to 843 losers.

Yesterday, foreign (-RM116m) and local institutional investors (-RM33m) were the net sellers whilst local retailers (+RM149m) were the main pillars of buying force on Bursa Malaysia. YTD, foreigners net sold RM20bn shares compared with net purchases by local institutional funds (RM9.7bn) and retailers (RM10.3bn).

TECHNICAL OUTLOOK: KLCI

From a YTD peak of 1618 (28 July), KLCI plunged as much as 79 pts to 1539 (12 Aug low) before consolidating sideways to end at 1555 yesterday, falling below the key 1560 or 50D SMA support. Follwoing the breakdown, KLCI is likely to witness more downward consolidation to lower supports at 1539 and 1510 (200D SMA) levels. Conversely, a strong reclaim above 1560 will boost the chances for the benchmark to retest 1577 (mid BB), 1582 (30D SMA) and 1591 (9 June high) upside territory.

Daily KLCI Chart: Range Bound Consolidation

MARKET OUTLOOK

Following the key 20D/30D SMA supports breakdown on TOPGLOV and HARTA (KLCI heavyweights), both stocks are likely to witness extended consolidation amid positive vaccines’ development progresses, capping potential recovery on KLCI in the short term. Moreover, nagging domestic political uncertainty, ongoing August reporting season, the resurgence of Covid-19 cases in global hotspots coupled with simmering US-China geopolitical tension may continue to dent market confidence.

CLOSED VIRTUAL PORTFOLIO POSITION – FIG 1

In the wake of the sluggish market sentiment, we took profit on BURSA (4.7% gain), EFORCE (14.9% gain), N2N (10.8% gain), TALIWRK (4.1% gain) and ASIAPLY (4.7% gain) yesterday

Source: Hong Leong Investment Bank Research - 26 Aug 2020