MARKET REVIEW

Global. Asian markets ended mostly higher as the risk-on mode continues, on hopes that a USD1.9 trillion Covid-19 aid package will be passed by U.S. lawmakers as soon as this month and increasing rollouts in vaccination numbers globally boosted optimism that the economy will take off in 2H21. Led by cyclical and growth stocks, the Dow ended +237 pts to an all-time high closing at 31385 (its 6th straight gains) amid strengthening prospects for a robust federal spending package, ongoing strong reporting season coupled with a slowdown in virus infection rates.

Malaysia. In line with the higher Dow and regional markets, KLCI failed to retain its early gains (similar to the previous sessions) by falling 5.3 pts at 1573.3, led by declines on banks (expectations of potential OPR cut on 4 March) and glove makers (negative reaction to the global rollouts on Covid-19 vaccination programs). For the 4th consecutive sessions, foreign (-RM107m) and local institutional (-RM16m) investors remained the major sellers whilst local retailers (RM123m) were the net buyers in equities.

TECHNICAL OUTLOOK: KLCI

The weak closings in the last few sessions suggested that the bears have a slight upper hand during this holiday -shortened week. As long as the key downtrend line at 1600 is not taken out successfully, KLCI is likely to trap in a downtrend channel, with critical support at 1563 (the critical H&S neckline support) levels. Failure to hold at this support could trigger a deeper slide towards 1538 (200D SMA) and 1500 psychological levels, with an eventual H&S target at 1430 zones. Conversely, a successful breakout above 1600 will lift the benchmark higher towards 1618-1642 (upper BB) territory.

MARKET OUTLOOK

Despite the fresh record high closings on Wall St three major indices and the positive roadmap of Malaysia’s National Immunisation Plan, KLCI is expected to remain lacklustre in this holiday-shortened week (11 Feb: half-day trading; 12 Feb). We see near term stiff resistances at 1600-1618 whilst supports fall on 1538-1563 amid elevated Covid-19 infections and the start of the Feb reporting season. As Brent oil advanced above USD60 for the first time in more than a year, helped by renewed optimism in the global economic recovery and supply cuts among key producers. As for stock picks, O&G stocks such as ARMADA, CARIMIN, DAYANG, DIALOG, MISC and SERBADK could attract some active trading interests.

Source: Hong Leong Investment Bank Research - 9 Feb 2021