MARKET REVIEW

Global. Most Asian markets ended in a positive tone as Fed officials pushed back on speculation that the Fed will begin to ease its asset-purchase program any time soon, which overshadowed worsening coronavirus situations and stepped up restrictions worldwide, which may temper expectations for strong pent-up consumption. In a tight range bound trade, the Dow fell as much as 76 pts to 30992 on profit taking as traders kept an eye on interest rates, the Trump historic impeachment and a still raging pandemic , before mitigating the losses to 8 pts at 31060, ahead of the Biden’s fiscal relief plan announcement tonight.

Malaysia. Despite the MCO2.0 announcement and the state of emergency proclamation, KLCI rallied 24.7 pts to end at 1632.7 as investors were optimistic of a more effective curb on the surging Covid-19 infections and reducing political risks whilst the less severe containment measures are also less disruptive to companies and households. Market breadth was bullish as gainers thumped losers 950-348. The foreign investors were the net buyers for the 5th consecutive day (RM127m) whilst local institutional and retail investors net sold RM86m and RM41m in equities, respectively.

TECHNICAL OUTLOOK: KLCI

The strong rebound in the 1st two days above the key 1600-1618 levels suggested that the bulls have not given up just yet. A further decisive advance above 1638 (23.6% FR) barrier could lift KLCI higher towards the next 1650 and 1667 (200W SMA) levels. On the flip side, a breakdown below 1590-1600 supports again may trigger further selloff to revisit 1562- 1573 levels

MARKET OUTLOOK

We are optimistic that the market would stabilise and move higher in the short to medium term after building a base near 1562-1572 levels. Although the MCO2.0 and the state of emergency measures will pose downside risks to economic and corporate earnings growth, investors should not lose sight of the light at the end of the tunnel as the progressive vaccine rollout and accommodative fiscal and monetary policy would keep equities favourable. Technically, further decisive advance above 1638 (23.6% FR) hurdle could lift KLCI higher towards the next 1650 and 1667 (200W SMA) territory. 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 - 14 Jan 2021