MARKET REVIEW

Global. Stock markets in Australia (-0.6%), Japan (-0.1%) and India (+0.02%) ended in a tepid mode last Friday on the back of light trading volumes as many markets in the region were closed for the start of the Lunar New Year holidays. Meanwhile, major US indices finished marginally higher to set another round of record closes as investors remained upbeat on the prospect of large fiscal stimulus, strong corporate earnings and progress in rollouts of vaccines to combat the viral pandemic. Led by cyclicals and value stocks, the Dow inched up 28 pts at 31458 (+4.9% WoW) whilst the S&P 500 gained 18 pts to 3935 (+5.9% WoW) and the Nasdaq Composite jumped 70 pts to 14095 (+7.8% WoW), respectively.

Malaysia. Ahead of the long CNY holidays and 4Q20 GDP annoucement, KLCI recorded its 3rd straight gains to close 2.7 pts higher at 1599.4 (+20.8 pts WoW) in a half-day session last Thursday (closed on Friday for CNY). Market breadth was positive with 574 gainers vs 383 decliners, with some 3.2bn shares worth RM2bn were traded. For the 2nd consecutive sessions, foreign (+RM4m) investors remained the major buyers whilst local institutional (-RM28m) and retailers (-RM14m) were the net sellers in equities.

TECHNICAL OUTLOOK: KLCI

As technical indicators are on the mend, KLCI is envisaged to break the stiff downtrend line resistance near 1602 (from 1696 high) after registering its 2nd weekly gains (above the 10D/20D SMAs). A successful breakout above 1602 will lift the benchmark higher towards 1618-1628 (upper BB) zones. On the flip side, failure to surpass the key downtrend resistance would witness the index to consolidate further, with key supports at 1561-1573 levels.

MARKET OUTLOOK

Technically, the bulls have the upper hands now to break the stiff downtrend line resistance near 1602 following back-to-back weekly gains of 33 pts to 1599.4, as sentiment is boosted by the ongoing rally in crude oil and FCPO prices and expectations of systematic and effective implementation of the National Covid-19 Immunisation Programme (effective early March) will encourage the re-opening of various economic sectors, restore consumer sentiment, as well as boost Malaysia’s economic growth and resilienc e. However, the upside is likely to remain capped by the 1618-1628 hurdles as the 4Q20 earnings season begins.

With the hype of vaccines and positive news flow, we feel this is an opportunity to accumulate Pharmaniaga (HLIB Research BUY-RM5.70 TP) in light of recent share price weakness, with key supports situated at RM4.58-4.76. Current consolidation will end if share prices could stage a strong breakout above RM5.00 psychological barrier, with eventual upside targets at RM5.30-5.60 zones.

Source: Hong Leong Investment Bank Research - 15 Feb 2021