MARKET REVIEW

Global. Despite imminent profit taking activities after the recent rally, most Asian markets ended higher mild gains as the rollouts of Covid-19 vaccines globally (data suggesting that the number of infections has peaked) coupled with the USD1.9 trillion Covid-19 stimulus package in the US boosted risk-appetite. Overnight, the Nasdaq closed at a fresh record milestone (+20 pts to 14008) whilst the Dow (-10 pts to 31375) and S&P 500 (-4 pts to 3911) eased on profit taking. Sentiment on stocks was positive, supported by an ongoing decline in US virus cases and a pick up the pace of the vaccine rollouts that will likely lead to a stronger-than-expected reopening.

Malaysia. Tracking record closings on three US key benchmark indices, KLCI staged a long-awaited 12.8 pts relief rally to 1586.1 as sentiment was boosted by the gradual decline in local Covid-19 infections after the MCO 2.0 extensions and the progressive roadmap of Malaysia’s National Immunisation Plan. Despite the strong benchmark gains, market breadth was flat with 536 gainers vs 527 decliners, with some 7.18 bn shares worth RM4.71bn were traded.

TECHNICAL OUTLOOK: KLCI

We may see further KLCI recovery in the near term following a strong 12.8-pt technical rebound yesterday above 10D SMA (1578), underpinned by the mild hook -ups in momentum indicators. Nevertheless, as long as the key downtrend resistance at 1600 (from a 52-week peak 1696) is not taken out successfully, the becnhmark is still likely to remain trapped within the 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 1540 (200D SMA) and 1500 psychological levels. Conversely, a successful breakout above 1600 will lift the benchmark higher towards 1618-1636 (upper BB) zones.

MARKET OUTLOOK

KLCI technical rebound may resume today following the rally in crude oil and FCPO prices, the progressive roadmap of Malaysia’s National Immunisation Plan and positive comments by MOH that the number of Covid-19 cases expected to be on a downward trend from now after hitting its peak on Jan 31 with 5,298 infections. However, the upside is likely to remain capped by the 1600-1618 hurdles ahead of the long CNY holidays (11 Feb: half-day trading; 12 Feb) and the start of the Feb reporting season.

Source: Hong Leong Investment Bank Research - 10 Feb 2021