MARKET REVIEW

Global. Despite a positive upgrade for developing Asia economies in 2021 amid China's strong pace of recovery, Asian markets ended mixed on stalled US stimulus negotiations and a staggering surge in Covid-19 cases worldwide. The Dow fell as much as 192 pts to 29876 before reducing the losses to 69 pts at 29999, as investors looked for signs of progress in fiscal stimulus talks to support the faltering US economy after a surge in weekly jobless claims data with most of the government financial aids for Americans and businesses has dried up.

Malaysia. KLCI rose 7.9 pts to a 18M high at 1654.4, supported by active buying interests on banking stocks on economic recovery optimism and sold down glove companies after TOPGLOV’s robust 1QFY21 results. Despite the headline gains, the broader market was in profit-taking mode after recent strong gains as losers 644 edged gainers 568. Yesterday, foreign investors (-RM160m) net sold for the 5th consecutive sessions whilst local institutional investors (turned net buyer after a 3-day selldown) and retail investors net bought RM119m and RM41m in equities, respectively.

TECHNICAL OUTLOOK: KLCI

Following a 202-pt or 13.9% rally from 1452 low to 1654 yesterday (approaching our 3rd major resistance targets of 1618-1638-1668 range), KLCI is ripe for a mild profit taking consolidation to neutralise overbought position. A successful breakout above the 1668 (200W Sma) hurdle post consolidation 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 1580-1600 territory.

MARKET OUTLOOK

Following a 202-pt or 13.9% rally from 1452 low to 1654 yesterday (approaching our 3rd major resistance targets of 1618-1638-1668 range), KLCI is ripe for a mild profit taking consolidation on the back of a steeply overbought stochastic reading, concerns over the uneven global economic recovery amid spiking Covid-19 cases worldwide, the repercussions on our economy and corporate earnings after the CMCO 2.0 as Covid-19 infections stay elevated, 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 proxies could cushion near term pullback near 1600-1618 levels.

Source: Hong Leong Investment Bank Research - 11 Dec 2020