MARKET REVIEW

Global. Tracking overnight record close on Dow, Asian bourses ended mostly higher amid optimism that of more US economic packages to cushion damage wreaked by the COVID19 pandemic, and hopes of Biden administration may adopt a more conciliatory and multilateral approach when dealing with China. The Dow eased 12 pts to 31176 on profit taking after a record close previously whilst the Nasdaq Composite rallied 0.6% to a record high at 13531. Sentiment was positive amid expectations of strong earnings from big tech companies next week, and more stimulus package and improved vaccines rollout will ensure a smoother and faster reopening.

Malaysia. In line with an overnight rally on Wall St, KLCI soared as much as 13.7 pts to 1615.2 but all the gains were wiped off as the index slipped 6.7 pts to end at 1594.8. Market breadth was negative with 347 gainers vs 812 losers amid fears of more MCO 2.0 extensions will further delay economic recovery. Trading volume increased to 6.7bn (5.8bn previously) while the value eased to RM4.3bn (RM4.4bn previously). Local retailers were the net buyers (RM173m) whilst the local institutional (-RM55m) and foreign (-RM118m) investors remained the sellers in equities.

TECHNICAL OUTLOOK: KLCI

KLCI extended its consolidation mode after retreating further from 1646 high (14 Jan) to end below 1600 psychological levels yesterday, registering its 6 th straight decline. As the benchmark is still unable to reclaim above the congested 1600-1618 overhead resistances, the bears seem to be in control again and further consolidation is expected, with major supports situated at 1588-1573-1563 territory. Only a decisive close above 1618 would augur well for a resumption in uptrend towards 1636-1650-1667 hurdles.

MARKET OUTLOOK

After violating the key multiple SMAs and 1600 psychological supports, KLCI is expected to engage in further consolidations (supports 1563-1573; resistances: 1600-1618-1634) as investors continue to weigh on the downside risks to economic and corporate earnings growth from MCO 2.0 coupled with the start of the upcoming 4Q20 results season.

On stock picks, we expect particle board companies such as EVERGRN (HLIB BUY-TP RM0.65) and HEVEA (HLIB BUY- TP RM0.83) to deliver improved earnings in the upcoming 4Q20 results driven by sustainable orderbook and ASPs, underpinned by the work-from-home global trend.

Source: Hong Leong Investment Bank Research - 22 Jan 2021