MARKET REVIEW

Global. Asian markets ended higher in the early sessions, taking cue from a rebound on Wall St last Friday and positive expectation of China’s Sep factory activity. However, most of the markets ended mixed as growing concerns over soaring new Covid-19 cases worldwide and looming first debate in the US presidential election between Trump and Biden later in the day. Overnight, Wall St finished lower on profit taking after surging 868 pts in three days, ahead of the first presidential debate before the 3 Nov election. The Dow fell 131 pts to 27453 while the S&P 500 index shed 16 pts at 3335, and Nasdaq Composite slipped 32 pts to 11085.

Malaysia. After rising 14.9 pts in three days, KLCI dropped 7.8 pts to 1503.9 on profit taking after staying between 1504 and 1517 levels, led by losses in HARTA, TOPGLOV, PPB, PCHEM and IHH. Sentiment was also dampened by the increasing Covid-19 cases and clusters in Malaysia coupled with the announcement of Lahad Datu, Tawau, Kunak and Semporna in Sabah under a targeted enhanced movement control order (TEMCO) from 29 Sep to 12 Oct. Trading volume was RM5.1bn shares worth RM3.6bn whilst the market breadth was negative with 412 gainers vs 611 losers.

Yesterday, foreign investors (RM-168m) and local retailers (-RM8m) were the main sellers whilst local institutional investors (RM176m) were the net buyers in equities. YTD, local institutional and retail investors were the major buyers with RM10.5bn and RM11bn, respectively whilst foreign investors net sold RM21.5bn 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 downtrend channel as the bulls seem unable to break the 1525 (downtrend line from 1618) resistance. Only a decisive breakout above the 1525 hurdle will spur a greater upside towards 1532 (upper BB) and 1541 zones. Otherwise, current consolidation mode is likely to prevail with key supports pegged at 1500, 1488 (lower BB) and 1474 levels.

MARKET OUTLOOK

The bulls attempted to push the KLCI above the 1525 (downtrend line from 1618) resistance in the last few days but buying momentum could not be sustained as concerns over a liquidity squeeze on the stock market amid the expiry of 6M grace period for loan repayments today coupled with spiking coronavirus cases locally and more MCOs could further decelerate a nascent economic recovery (World Bank downgraded Malaysia’s 2020 GDP to -4.9% from -3.1% earlier). Nevertheless, the recent announcement of the RM10bn Kita Prihatin package and expectation of further stimulus measures in the Budget 2021 (on 6 Nov) may cushion near term downside. Major supports are pegged at 1500-1488-1474 zones.

On stock pick, we believe KRONO (RM0.575, Not-rated) would be a beneficiary in time of Covid-19, supported by its various data management solutions and geographic footprints across key Asian markets, as customers build out their digital capability in enterprise data management (EDM) to improve efficiency and mobility as part of their operational transformation to the new normal.

Listed on the ACE Market since 2014, KRONO provides on-site and off-site EDM and data storage solutions to Asian businesses. The group specialises in data assurance and protection to ensure business continuity for its clients via its EDM Infrastructure Technology and EDM Managed Services division. The Group is presently located in Malaysia, Singapore, Thailand, Philippines, Indonesia, India, Taiwan, Hong Kong and China.

Technically, the stock has been trading sideways but we a triangle pattern taking form here, supported by bottoming up indicators. A decisive breakout above RM0.59 (30D SMA) will lift prices higher towards RM0.625 (200D SMA or downtrend line) before reaching our LT objective at RM0.685 (3 Sep high) levels. Key supports are pegged at RM0.555 (support trendline) and RM0.52 (lower BB) levels. Cut loss at RM0.515.

VIRTUAL PORTFOLIO - FIG1

In the wake of the market uncertainty, we had closed SUNWAY (1.5% gain) and TOPGLOV (13% gain) yesterday amid weakening technicals.

Source: Hong Leong Investment Bank Research - 30 Sept 2020