MARKET REVIEW

Global. Excluding a 1.1% fall on SHCOMP, most Asian markets ended higher as investors remained upbeat on US stimulus negotiations and vaccines’ optimism, offsetting the unabated Covid-19 cases worldwide. The Dow rose as much as 146 pts to an all-time high at 30319 on vaccines optimism. However, the index staged a reversal to end 105 pts lower at 30068 as investors were discouraged over the halting progress of economic stimulus talks.

Malaysia. KLCI jumped 14.8 pts to close at 18M high 1646.5 amid active buying interests on banking stocks after PBBANK announced a 4:1 bonus issue. However, market breadth was negative as losers 734 thumped gainers 521 amid broad-based profit taking on penny stocks and lower liners. Yesterday, foreign investors (-RM179m) and local institutional (- RM89m) investors remained as the net sellers for the 3rd consecutive sessions whilst local retail investors net bought RM268m in equities.

TECHNICAL OUTLOOK: KLCI

Following a 194-pt or 13.3% rally from 1452 low to 1646 yesterday (hitting our 2nd major upside targets of 1618-1638-1668 range), there could be a mild interim pullback to neutralise overbought position amid a shooting star pattern and steeply overbought stochastic reading, before heading further to our 3rd 1668 or 200W SMA target (supported by positive RSI and MACD readings). A successful breakout above the said hurdles could signal a LT bullish view to re-challenge the 1700 psychological levels. Conversely, a sharp fall below 1618 and 1610 (uptrend line support from 1452) supports may disrupt the near term upward momentum for further retracements towards 1570-1600 territory.

MARKET OUTLOOK

Following a 194-pt or 13.3% rally from 1452 low to 1646 yesterday (hitting our 2nd major upside targets of 1618-1638-1668 levels), KLCI is ripe for a mild pullback amid a shooting star pattern and overbought stochastic reading, concerns over the uneven global economic recovery, the repercussions on our economy and corporate earnings after the CMCO 2.0, and Fitch’s downgrade on Malaysia’s sovereign credit rating. However, we opine that the traditional Dec window dressing (average +3.8% return from 1990 -2019 with a 87% successful hit rate) and continued migration from pandemic-themed to economic recovery beneficiaries may provide the much-needed impetus to boost the benchmark higher towards our final 1668 target before a more meaningful profit taking pause.

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of a grossly overbought market, we decided to take profit on our virtual portfolio stock i.e. MEDIA (22% gain) on 9 Dec.

Source: Hong Leong Investment Bank Research - 10 Dec 2020