MARKET REVIEW

Global. Despite the strong Dec trade data from China and positive trial data from one -shot J&J Covid-19 vaccine, Asian markets ended mixed as investors took a wait-and-see stance ahead of the unveiling of U.S. stimulus details from Biden and the Fed’s latest policy framework from Powell. The Dow jumped as much as 168 pts an intraday high of 31223 following positive vaccine news from J&J and Powell’s remark that interest rate hike would not be coming anytime time soon and pushed back market talks of bond tapering program. However, strong profit taking saw the index tumbled 236 pts from the peak to end 68 pts lower at 30991 as investors await details of Biden stimulus plan.

Malaysia. After a strong 24.7-pt rally on 13 Jan, KLCI eased 1-pt (mainly driven by a pullback in glove stocks) to 1635.7 as investors weighed on the economic impact of the MCO 2.0 Market breadth was neutral as gainers edged losers 584-583. Trading volume fell a tad to 6.5bn (7.1bn previously) while trading value also fell to RM4.9bn (RM5.1bn previously). The foreign investors (RM5m) and retailers (RM7m) were the net buyers whilst local institutional investors net sold RM12m in equities.

TECHNICAL OUTLOOK: KLCI

After staging a rebound from 1573 (7 Jan) to a high of 1646 yesterday (a tad below our envisaged resistance), KLCI eased 1-pt on profit taking to finish at 1635.7. We may see further profit taking consolidation ahead but as long as the index is able to close above 1618 levels, KLCI looks to be on course for a test of the next upside hurdles near 1650- 1667 zones in the next few weeks. On the flip side, a breakdown below 1600-1618 supports again may trigger further selloff to revisit 1562-1573 levels.

MARKET OUTLOOK

We are optimistic that the market would stabilise and move higher towards 1650-1667 resistances after a brief profit taking consolidation (supports 1562-1573 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 as the vaccine deployment plans and accommodative fiscal and monetary policy coupled with the recent rally in commodity prices would keep equities favourable. Our fundamental 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 - 15 Jan 2021