MARKET REVIEW

Global. Led by declines in Korea (-2.0%), Thailand (-1.1%), India (-1.1%) and Japan (- 0.6%), Asian markets mostly ended lower as Biden’s USD1.9trn American Rescue Plan could trigger a rotation from emerging markets in Asia back to the US and rising COVID-19 cases in China and worldwide reinforced investor concerns over the prospects for a global economic recovery. The Dow plunged as much as 379 pts to 30612 amid profit taking in banks shares (despite positive results) and rising worries of further lockdowns to curb the virus loom and growing violence ahead of the Biden’s inauguration on 20 Jan. However, the losses were narrowed to 177 pts at 30814 (-0.9% WoW) due to positive expectations of Biden’s USD1.9trn American Rescue Plan.

Malaysia. KLCI fell 5.7pts to 1627 (-6.2 pts WoW) to record its 2nd straight decline, mainly driven by profit taking pullback on banking stocks ahead of the BNM meeting on 20 Jan. Market breadth was negative with 512 gainers vs 571 losers as investors continue to weigh on the economic impact of the MCO 2.0 and the state of emergency declaration. Trading volume fell a tad to 5.8bn (6.5bn previously) while the value also fell to RM4.1bn (RM4.9bn previously). The foreign investors (RM4m) and retailers (RM4m) were the net buyers whilst local institutional investors net sold RM71m in equities.

TECHNICAL OUTLOOK: KLCI

After staging a rebound from 1573 (7 Jan) to a high of 1646 on 14 Jan (a tad below our envisaged 1650 resistance), KLCI fell 19.2 pts to finish at 1627 last Friday on profit taking. We may see further range bound consolidation this week but as long as the index is able to close above 1600-1618 levels, the index is likely on course for the next upside hurdles near 1650-1667 zones. On the flip side, a breakdown below 1600 again may trigger further selloff to revisit 1573 and 1562 (100D SMA) levels.

MARKET OUTLOOK

We expect KLCI to trade range bound this week (supports 1573-1600; resistances: 1637- 1650-1667) resistances as investors continue to weigh on the economic impact of the MCO 2.0 and the state of emergency declaration coupled with the upcoming BNM meeting on 20 Jan (OPR stood at the lowest level of 1.75% after four cuts of 1.25% in 2020). While the overall 2021 recovery thesis remains intact, opposing news flow between vaccine deployments and a still rising Covid count 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 wake of the market volatility, we decided to take profit on FOCUSP (14% return) and MTAG (11% return) last Friday after hitting their R2 targets, respectively

Source: Hong Leong Investment Bank Research - 18 Jan 2021