MARKET REVIEW

Global. After recent rallies due to Covid-19 vaccine rollouts and US stimulus hopes, Asian markets ended mixed as concerns that the global economy are far from out of the woods amid record high new infections and US jobs disappointment. After hitting all-time high of 30218 last Friday amid vaccines optimism, the Dow slipped 148pts to 30069 overnight as worries about rising coronavirus cases and delays in pushing through new stimulus aids before end-Dec coupled with increased economic restrictions or shutdowns could slow the near-term recovery.

Malaysia. After recording its 5th consecutive weekly gains, KLCI inched up 1-pt to 1622.9 as investors weigh on the vaccines’ optimism agaisnt the repercussions on economy and corporate earnings after the CMCO 2.0 and Fitch’s downgrade on Malaysia’s sovereign credit rating. Market breadth was midly positive with 697 gainers vs 664 losers while trading volume rose 16% to 16.5bn shares worth RM7.2bn due to greater retail investors’ participation. Yesterday, foreign investors (-RM157m) and local institutional (-RM51m) investors were the net sellers whilst local retail investors net bought RM208m in equities.

TECHNICAL OUTLOOK: KLCI

Although near term profit taking consolidation will prevail after rallying from 1452, KLCI’s advance towards 1639 (150W SMA) and 1668 (200W SMA) zones is still underway, barring any decisive breakdown below 1590 (uptrend line support from 1452) -1600 levels. A successful breakout above the said hurdles could signal a LT bullish view to re-challenge the 1700 psychological barrier. Conversely, a fall below 1590-1600 supports may trigger more retracements towards 1562 territory.

MARKET OUTLOOK

Following recent surge from 1452 low, KLCI is ripe for a mild pullback (with key supports at 1590-1600) due to the grossly overbought technical readings, concerns over the uneven global economic recovery despite vaccines’ optimism, the repercussions on economy and corporate earnings after the CMCO 2.0, and Fitch’s downgrade on Malaysia’s sovereign credit rating. However, we believe the traditional Dec window dressing (average +3.8% return from 1990-2019 with a 87% successful hit rate) and continued shift from pandemicthemed to economic recovery beneficiaries may provide the much-needed impetus to lift the benchmark higher towards 1639-1668 zones before profit taking pause.

Source: Hong Leong Investment Bank Research - 14 Dec 2020