MARKET REVIEW

Global. Asian markets ended mildly higher last Friday as signs of progress on US stimulus measures after Democrats were working on a USD2.4 trillion relief package, outweighed concerns that a resurgence in coronavirus cases globally could tamper pandemic-ravaged economy. Meanwhile, the Dow jumped 358 pts at 27174 (-1.8% WoW) as investors revisited bashed-down technology shares amid optimism on US stimulus talks following news that Pelosi will continue to discuss with Mnuchin and hope to vote on the bill as early as this week.

Malaysia. The KLCI closed 8.3 pts higher at 1509.1 (+2.5 pts WoW) to record its 2nd straight gain after staying between 1505 and 1516 levels, lifted mainly by the glove counters amid active buying interests due to continued increase in Covid-19 cases locally and globally. Sentiment was also boosted by Malaysia’s retention on the FTSE Russell World Government Bond Index (WGBI) watch list. Trading volume shrank to RM5.2bn shares worth RM4bn, from 5.9bn shares worth RM4.56bn on Thursday. The market breadth was positive with 572 gainers beat 446 losers.

Yesterday, local retailers (RM-90m) and foreign investors (RM-125m) were the main sellers whilst local institutional investors net bought RM215m in equities. YTD, local institutional and retail investors were the major buyers with RM10.1bn and RM11.1bn, respectively whilst foreign investors net sold RM21bn in equities.

TECHNICAL OUTLOOK: KLCI

After rebounding from a low of 1474 (10 Sep) to a high of 1541 (17 Sep), KLCI is still trapped in the tug of war between bulls and bears as KLCI is still drifting along 1490 (lower BB) and 1513 (mid BB) zones but the bulls seems having a slight upper hand right now after closing at 1509 last Friday (above the key 1502 or 200D SMA levels). Moving forward, a decisive close above 1513 (mid BB) will spur the KLCI to re-challenge the 1530 (upper downtrend channel) levels. Conversely, a fall below 1490 will trigger further pullback towards 1470 (lower downtrend channel) and 1461 (38.2% FR) territory.

MARKET OUTLOOK

This week, KLCI is expected to remain range bound pending further fresh catalysts but potential 3Q20 window dressing and active buying interests on the glove counters due to continued hike in Covid-19 cases could lift KLCI to re-challenge the downtrend line near 1530 levels. Overall, we continue to err on the side of caution amid persistent speculation of GE15 after PM’s Gabungan Rakyat Sabah has won at the Sabah state elections (with a simple majority) last Saturday and awaiting the appointment of new Sabah CM by the Yang-Dipertua Negeri Sabah, 2) further liquidity squeeze on stock market amid the expiry of 6M grace period for loan repayments by end Sep, 3) concern over government’s major source of income following Petronas sluggish 1HFY20 results, 4) the Anwar’s factor after he claimed to have 'formidable and convincing' support to form a new government on 23 Sep, and 5) rising new Covid-19 cases and clusters in Malaysia. Major supports are pegged at 1500-1490-1470 whilst key resistances are situated at 1513-1521-1530 zones.

On stocks selection, given the resurgence of Covid-19 cases locally and abroad, appetite on glove stocks could be revived as lofty valuations came back to earth after the recent selldown. HLIB’s current BUY ratings are TOPGLOV (TP RM13.00, 10.8x FY8/21 P/E), HARTA (TP RM24.10, 28.9x FY3/21 P/E) and KOSSAN (TP RM18.30, 18.8x FY12/21 P/E).

Source: Hong Leong Investment Bank Research - 28 Sept 2020