MARKET REVIEW

Global. Asian markets ended mixed after record closings as Covid-19 stimulus-led global recovery and ultra-low monetary policy were weighed down by lofty valuations and spiking Treasury yields that could eventually spur rising inflation. Overnight, the Dow slid as much as 184 pts to 31338 before staging a strong rebound to end +90 pts at 31613, led by gains in cyclical stocks on data showing consumer spending has returned after a two-month hiatus and further signs that market-friendly monetary policy will prevail. The Fed’s minutes signaled the central bank is in no hurry to rein in its loose monetary policy measures, as the economy is nowhere close to pre-pandemic levels.

Malaysia. Tracking pullback in regional markets and news of the further extension of the MCO in Selangor, Kuala Lumpur, Johor and Penang, KLCI tumbled 10.9 pts to 1595.3, led by selldown in banking, telco and gaming stocks. Market breadth was negative as losers 622 led gainers 548 with a total of 10.1bn shares traded val ued at RM5.2bn (vs 12.6bn shares worth RM5.79bn on 16 Feb). Local retailers (+RM133m) and local institutional (+RM2m, 1st net buy after selling in the last 12 consecutive sessions) were the net buyers whilst the foreign investors (-RM135m) were the major sellers for a 2nd straight sessions.

TECHNICAL OUTLOOK: KLCI

We expect more consolidation ahead following recent unsuccessful attempt to break above the key 1618 hurdle. Lower supports now are pegged at 1575 (100D SMA) and 1561 (29 Jan low). Failure to hold at these levels could trigger a resumption of selling pressure towards 1545 (200D SMA) and 1500 territory. Only a successful breakout above 1618 will lift the benchmark from ongoing consolidation to advance further towards 1629-1644 zones.

MARKET OUTLOOK

We could witness a resumption of tug-of-wall between the bulls and bears as the 4Q20 earnings season begins following KLCI’s failure to cross above the key 1618 hurdle since staging a technical rebound from 1561 on 29 Jan. Nevertheless, downside risk could be limited near 1545-1561 zones in the wake of the optimism over the Fed’s dovish outlook, huge US stimulus package, falling Covid-19 infections globally and the start of Malaysia Covid-19 vaccination programme on 26 Feb.

Source: Hong Leong Investment Bank Research - 18 Feb 2021