MARKET REVIEW

Global. Asian markets fell on profit taking after a huge rally in Nov (on Biden’s US presidential win and promising Covid-19 vaccines trials results) amid surging Covid-19 cases worldwide, rising US-China geopolitical tensions following reports Trump administration is considering blacklisting SMIC and CNOOC, and the MSCI portfolio rebalancing. Overnight, the Dow slipped 271 pts to 29638 amid month-end rebalancing of portfolios and renewed US-China tensions, coupled with concerns of post-Thanksgiving virus surge. In Nov, the Dow skyrocketed 11.9% to record its biggest monthly gains since 1987.

Malaysia. KLCI slid 44.9 pts to 1562.7 (cut the Nov gains to 95.8 pts) on last minutes programmed sell-off, mainly due to the portfolio rebalancing by MSCI and local institutionals in the banking, oil & gas, consumer and telco sectors. However, market breadth stayed positive as the gainers edged the losers on a ratio of 688-to-563 with 9.0bn securities traded (focused on ACE and lower liners) for RM7.7bn. Foreign investors offloaded RM541m securities (the highest YTD) whilst local institutional and retail investors net bought RM358m and RM183m in equities, respectively.

TECHNICAL OUTLOOK: KLCI

Following a 44.9-pt plunge to close at 1562.7 on 30 Nov, near term outlook has turned bearish after breaking below 10D SMA (1594) and 1579 (76.4% FR) levels. Unless KLCI can swiftly reclaim above 1579-1594 overhead resistances, the benchmark could face further selling pressure towards 1555 (61.8% FR) and 1545 (100D SMA) territory on weakening technical readings before staging a technical rebound. On the upside, stiff resistances remain at 1579-1594-1600. We would only change our short term view to positive if the index can close above these barriers in the coming sessions.

MARKET OUTLOOK

Following the conclusion of the MSCI portfolio review (implemented based on 30 Nov closing prices), promising Covid-19 vaccines trials results (Moderna filed with FDA today for emergency use authorization) and expectations of Dec window dressing (KLCI grew 3.8% on average from 1990-2019), we believe KLCI is likely to stage a technical rebound in the short term. Nevertheless, market volatility may persist (with key supports at 1555-1535) due to the concerns of CMCO 2.0 impact to our economy amid elevated Covid-19 cases and clusters. On the upside, stiff resistances are situated at 1579-1594-1600 zones

Source: Hong Leong Investment Bank Research - 1 Dec 2020