MARKET REVIEW

Global. Most Asian markets ended higher last Friday in anticipation of more US fiscal stimulus after Biden is scheduled to be inaugurated on 20 Jan, which overshadowed growing calls for Trump’s removal from office after he incited his supporters to storm the US Capitol Hill. After a record close on 8 Jan, the Dow slid as much as 248 pts to 30793 on profit taking before staging a strong rebound to end 57 pts higher at 31098 last Friday (491 pts or 1.6% WoW) amid expectations of further stimulus and vaccine rollouts following a disappointing US Dec jobs data and a resurgence of the coronavirus pandemic .

Malaysia. KLCI tumbled as much as 7.9 pts to 1595.1 as sentiment was dampened by speculation of MCO 2.0 in red zones following the resurgence in daily local Covid-19 transmissions to record highs. However, the index staged a dramatic final hour turnaround to end 30.2 pts higher at 1633.2 (+30 pts WoW) with a buying frenzy on glove stocks as well as bargain hunting on selected banking and O&G stocks. Market breadth was bearish as losers thumped gainers by 1040-353 despite the rebound on the benchmark. Foreign investors turned into net buyers (RM 436m) whilst the local institutional investors and retailers net sold RM429m and RM7m in equities, respectively.

TECHNICAL OUTLOOK: KLCI

The bullish close last Friday above our envisaged 1600-1618 overhead resistances could signal potential downtrend reversal from 1572 (7 Jan low) from 1696 (14 Dec high), supported by bottoming up technicals and the hammer candlestick formation. A further strong close above 1638 (23.6% FR) could spur greater upside towards 1650 and 1667 (200W SMA) levels. On the flip side, a breakdown below 1600-1618 levels may trigger more selloff towards 1590 (lower BB), 1572 and 1545 (61.8% FR) levels.

MARKET OUTLOOK

The strong 1600-1618 overhead resistances breakout last Friday (mainly driven by glove stocks) should bode well for further KLCI advance to retest 1638-1650-1667 hurdles, supported by bottoming technical indicators. While the overall 2021 recovery thesis remains intact, opposing news flow between vaccine rollouts and a still rising Covid count coupled with expectations of further targeted MCO restrictions (to be announced by PM today) will bring about much volatility along this path, perhaps also exacerbated by fluid politics and RSS reintroduction. Our top picks have a recovery bias (Tenaga, RHB, DRB, MBM and FocusP), combined with volatility (Bursa), defensives (TM, MQREIT), value (IJM, Sunway, Armada) and sold down pandemic beneficiaries (Top Glove).

VIRTUAL PORTFOLIO POSITION-FIG1

In the of the weakening technicals on DPIH, we decided to square off the stock in our outstanding virtual portfolio on 8 Jan with a 5.3% gain.

Source: Hong Leong Investment Bank Research - 11 Jan 2021