MARKET REVIEW

Global. Despite Covid-19 vaccines’ optimism, Asian markets ended mixed amid a stalled US stimulus talks, a stalemate in Brexit negotiations and a flare-up in US-China tensions. The Dow dropped as much as 179 pts to 29820 amid alarming Covid-19 death tolls, increasing business restrictions and layoffs coupled with uncertainty over fresh economic stimulus. However, the index reversed losses to gain 47pts at 30046 as lawmakers passed a stopgap spending bill to avert a federal-government shutdown, expectations that FDA’s approval of Pfizer’s coronavirus vaccine for emergency use coupled with a 13% surge in Walt Disney prices after Disney+ subscribers exceeded expectations.

Malaysia. KLCI rallied 30.2 pts at 1684.6 (+62.7 pts WoW), led by buying interests on the banking, O&G, gaming and leisure stocks amid window dressing activities and vaccines’ recovery plays. However, 690 losers outpaced 626 gainers after 10bn shares valued at RM6.2bn were traded. Last week, foreign investors (-RM575m) and local institutional (- RM143m) were the net sellers whilst retail investors net bought RM718m equities.

TECHNICAL OUTLOOK: KLCI

Despite expecting a healthy profit taking pullback in the near term after surging 62.7 pts WoW and 121.9 pts in Dec, there is still room for KLCI appreciation, barring a decisive breakdown below the 1668 (200W SMA) and 1638 (150W SMA) resistances-turnedsupports. Overall, the long white candle and bullish breakout above 1668 levels last Friday could still lift KLCI higher towards 1700 (psychological levels) and formidable 1732 (22 Feb 2019) resistance amid bullish MACD and RSI indicators.

MARKET OUTLOOK

Despite surging 62.7 pts WoW and 121.9 pts in Dec to 1684.5 last Friday, there is still room for KLCI’s upside towards overhead resistances at 1700-1732 territory, underpinned by the bullish MACD and RSI indicators, traditional Dec window dressing (average +3.8% return from 1990-2019 with a 87% successful hit rate) and more funds flowing into recovery/value play themes. Nevertheless, a healthy profit taking consolidation is foreseeable after a stellar run due to: 1) toppish indicators, 2) fragile economic recovery amid spiking Covid-19 cases worldwide, 3) repercussions on our economy and corporate earnings after the CMCO 2.0 as Covid-19 infections stay elevated, 4) concerns of potential sovereign credit rating downgrades by Moody’s (next review expected to be in 1Q21) and S&P (next review expected to be in 2Q21) after Fitch’s downgrade on 6 Dec, and 5) possible lifting of the short selling ban after expiring on 31 Dec.

Source: Hong Leong Investment Bank Research - 14 Dec 2020