MARKET REVIEW

Global. Except for China and Hong Kong markets, most Asian bourses ended mixed on profit taking amid surging coronavirus cases and the discovery of new highly infectious COVID-19 strains, stoking fears of fresh global lockdowns. Sentiment was also dampened by worries about overheated equity markets and a potential shift in Fed’s monetary policy following a recent spike in US 10Y Treasury yields (FOMC meeting 26-27 Jan). In a volatile trade, the Dow rose 60 pts to 31068 as investors mulled the prospects of the economic recovery and vaccine rollout coupled with additional U.S. fiscal stimulus, overshadowed rising political tensions after Democrats said they would move ahead with a plan to impeach Trump this week.

Malaysia. KLCI plunged as much as 26.6 pts to 1590.7 as sentiment was rattled by the reinstatement of the MCO2.0 and the declaration of the state of emergency to curb the Covid-19 pandemic. However, bargain hunting on bashed down blue chips and a rebound in index-linked glove stocks reduced the losses to 5.2 pts at 1612. After recorded the 7th consecutive negative Gainers/losers ratio, market breadth turned positive as gainers edged losers 732-502. The local institutional investors net sold RM103m in securities (net sellers for the 4th straight sessions) whilst the foreign investors and retailers net bought RM102m (net buyers for the 4th consecutive days) and RM2m in equities, respectively.

TECHNICAL OUTLOOK: KLCI

The strong rebound yesterday has formed a hammer candlestick and reclaimed above the 1600 psychological level, suggesting that the bulls have not given up just yet. A further decisive advance above 1618 barrier could lift KLCI higher towards the next 1636 (mid BB), 1650 and 1667 (200W SMA) levels. On the flip side, a fall below 1590-1600 supports may trigger more selloff to revisit 1560-1570 levels.

MARKET OUTLOOK

We believe the market would stabilise and move sideways (supports 1573-1600) in the short term to digest a more relaxed version of MCO 2.0 and the declaration of the state of emergency to curb the Covid-19 pandemic. Technically, only a strong reclaim above 1618- 1636 (20D SMA) will lift KLCI out of the current consolidation mode to advance higher to 1650-1667 zones. 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).

Source: Hong Leong Investment Bank Research - 13 Jan 2021