MARKET REVIEW

Global. Tracking overnight Dow’s 2% slump (the biggest one-day decline since Oct 20), Asian markets extended a retreat from last week’s all-time high, taking cues from disappointing earnings and elevated valuations from tech giants and cautious tone from Powell that the US economy is still a long way from full recovery and still short of policy makers’ inflation and job goals. Roaring back from a 634-pt plunge (on 27 Jan, the Dow rallied as much as 648 pts 30951 before paring the gains to 300 pts at 30603, led by a rally in big tech on bullish quarterly earnings and expectations the economy will rebound strongly in the months ahead amid more progressive vaccine rollouts.

Malaysia. Following a 61.4-pt slide in the last 9 sessions, KLCI staged a long-awaited technical rebound as the index rallied as much as 17.8 pts to 1593.1 (led by banks, telco and O&G stocks) after MOH said that the MCO 2.0 may not be extended from 4 Feb. However, the gains were reduced to 5.3 pts at 1580.6 as sentiment turned cautious ahead of the extended holidays (Thaipusam on 28 Jan and Federal Territory Day on 1 Feb) and investors await further clarification from the government due to MCO 2.0 expiry on 4 Feb. About 5.6bn (5.9bn previously) securities were traded for RM5.0bn (RM4.7bn previously) whilst market breadth was positive for a 2nd day as gainers led losers by 614 to 525.

TECHNICAL OUTLOOK: KLCI

After sliding 121 pts or 7.1% from 1696 (14 Dec high) to 1575, KLCI finally staged a long awaited 5.3 pts technical rebound on 27 Jan to 1580.6. In our view, as long as the congested 1600-1618 overhead hurdles are not taken out decisively, KLCI could succumb to further pullback towards 1563 (the crucial Head & Shoulder neckline support). A break below this neckline would trigger a deeper consolidation at 1533 (200D SMA) and 1500 psychological levels, with LT downside targets at 1430 zones. On the flip side, only a successful breakout above 1600-1618 resistances could arrest the downtrend for further relief rebound towards 1645-1666 hurdles.

MARKET OUTLOOK

Pending further details on the MCO 2.0 next week, we expect KLCI to continue its consolidation mode after violated the key multiple SMAs and 1600 psychological levels (supports 1533-1563; resistances: 1600-1618-1645), as investors continue to weigh on the downside risks to the economy and corporate earnings growth from MCO 2.0 and ahead of the extended holidays (Federal Territory Day on 1 Feb).

Source: Hong Leong Investment Bank Research - 29 Jan 2021