MARKET REVIEW

Global. Asian stocks retreated on worries about economic reality due to spiking Covid-19 deaths worldwide and stricter lockdowns imposed by major economies. However, progressive rollouts of vaccination, an upbeat Nov industrial output in China and optimism of further US stimulus deals capped further losses. Overnight, the Dow rallied 338 pts to 30199 as investors grew more optimistic about Congress passing another economic relief package and potential endorsement by FDA on Moderna’s Covid-19 vaccines (2nd approval behind Pfizer) for emergency use after showing favourable safety profile.

Malaysia. Ahead of a 3 rd and final vote to pass the government's 2021 budget, KLCI dropped as much as 6.9 pts to 1655.9 before recouping the losses to end 11.3 pts higher at 1674 after the Budget 2021 was finally passed in Dewan Rakyat by a razor-thin margin of 111-108. Market breadth turned positive with gainers/losers ratio at 1.26 (after recording below 1x in the last 5 days).

TECHNICAL OUTLOOK: KLCI

Despite witnessing a profit-taking pullback of 6.9 pts in the early sessions, KLCI managed to stage a strong reversal to end 11.3 pts higher at 1674. In our view, as long as the benchmark is able to consolidate its recent gains (after rallying 222 pts from 1452 low) near 1645 territory, we believe the near-term bullish trend stays intact before resuming its uptrend to 1700 and 1732 (22 Feb 2019) levels. Conversely, a breakdown below 1645 support will drag the index lower towards 1618 (mid BB) and 1600 zones.

MARKET OUTLOOK

In our view, as long as the benchmark is able to consolidate its recent gains (after rallying 222 pts from 1452 low) near 1640-1650 territory, we believe the near-term bullish trend stays intact (with stiff resistances at 1700-1732), underpinned by the vaccines’ optimism, hopes of further US stimulus package, 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. While the market may have an optimism bias next year, inevitable hiccups will bring volatility along this recovery path. Hence, our HLIB Research 2021 top picks have a recovery bias (Tenaga, AMMB, DRB, MBM and FocusP), combined with volatility (Bursa), defensives (TM, MQREIT), value (IJM, Sunway, Armada) and sold down pandemic beneficiaries (Top Glove).

Source: Hong Leong Investment Bank Research - 16 Dec 2020