MARKET REVIEW

Global. Asian bourses edged higher as investors cheered the Fed’s strengthened commitment to support the US economy and growing expectations for a stimulus deal by end-Dec as the US continues to grapple with a 2nd wave of COVID-19 cases. Despite soaring weekly jobless claims, the Dow jumped 148 pts to 30303 amid the FDA’s approval of Moderna’s Covid-19 vaccine for emergency use and expectations of a federal-spending deal by end-Dec amid signs of a faltering economic recovery and records highs for virus infections and deaths.

Malaysia. Persistent profit-taking interests after recent stellar gains and news about the uplifting of the RSS ban come effective 1 Jan dragged the KLCI 7 pts lower at 1674.4. Market breadth was negative as the gainers/losers ratio weakened to 0.56, with 9.24bn shares worth RM4.33bn were traded.

TECHNICAL OUTLOOK: KLCI

KLCI continues its healthy profit taking pullback after enjoying a promising run from 2 Nov low of 1452. In our view, as long as the benchmark is able to consolidate its recent gains near 1650 (uptrend line support from 1452) territory, near-term bullish trend would stay intact. However, further retracement below the support will disrupt the underlying positive sentiment, potentially dragging the index lower towards 1626, 1610 and 1600 zones. Key resistance remains at 1696-1710-1730 territory.

MARKET OUTLOOK

As long as the benchmark is able to consolidate its massive gains (after rallying from 1452 low) near 1650 uptrend line support, KLCI’s near-term bullish trend would stay intact (with stiff resistances at 1696-1710-1730), supported 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. Nevertheless, the SC/Bursa announcement on 16 Dec to uplift the temporary suspension of RSS (on 1 Jan 2021) will trigger more choppy trends along this recovery path. Hence, our HLIB Research 2021 top picks strike a balanced portfolio in 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 - 18 Dec 2020