MARKET REVIEW

Global. Led by technology and O&G stocks, Asian markets were higher in line with extended rallies on Dow and crude oil prices overnight, as volatility caused by the Reddit fueled retail trading frenzy dissipated on expectations of tougher regulation, while optimism about US fiscal stimulus, faster roll-out of vaccines also supported sentiment. Overnight, the Dow dipped as much as 166 pts on profit taking after surging 705 pts in two days. Nevertheless, ongoing positive 4Q20 results, hopes for further stimulus and better-than expected ADP private jobs and ISM services data kept the downside momentum in check as the Dow ended 36 pts higher to 30723.

Malaysia. In tandem with rising regional bourses, KLCI surged as much as 17.4 pts to 1597.9, led by bargain hunting on recovery stocks in the banking, telco and oil & gas sectors following positive news that all economic sectors are allowed to open (albeit with tightening SOPs) despite the MCO’s extensions and MOH’s assurance that the first phase of the National Immunisation Plan is on track ahead of the arrival of the Pfizer -BioNTech vaccines in Malaysia on Feb 26. However, strong profit taking on glove stocks after recent rally capped the gains to a mere 2.5-pt at 1583. On the broader market, gainers triumphed losers by 735 to 424 whilst a total of 6.1bn securities were traded worth RM4.94bn.

TECHNICAL OUTLOOK: KLCI

After sliding 60.8 pts in Jan, KLCI continued its sideways recovery yesterday as the index jumped as high as 1597 before easing lower to 1583. We remain positive on KLCI near term recovery towards 1600-1618 zones amid the bullish Harami pattern (on 2 Feb) and hook-up in technical indicators, barring any breakdown below the critical H&S neckline support at 1563. Failure to hold at this support would trigger a deeper slide towards 1536 (200D SMA) and 1500 psychological levels, with an eventual H&S target at 1430 zones.

MARKET OUTLOOK

Pending further details of the MCO extension to 18 Feb, KLCI is likely to trend sideways, with bargain hunting activities on recovery stocks within the banking, oil & gas, telco, auto and technology sectors. However, the index could face some stiff resistances near 1600- 1618 amid elevated Covid-19 infections and the start of the Feb reporting season. Given the potential for volatility, a balanced portfolio remains appropriate. Hence, we would adopt a more balanced approach in our top picks with a combination of recovery plays (Tenaga, RHB, DRB, MBM, AEON, GDB), volatility (Bursa) defensives (TIME, Axis), value (Sunway, Armada) and sold down pandemic beneficiaries (Top Glove).

Source: Hong Leong Investment Bank Research - 4 Feb 2021