MARKET REVIEW

Global. Despite a 0.6% gain in SHCOMP (re-opened after a long CNY break), most Asian markets ended lower. Investors’ were grappled with lofty equity valuations and spiking treasury yields coupled with rising inflation expectations, overshadowed a rally that’s driven by fiscal and monetary stimulus measures as well as vaccine-induced economic recovery. Led by profit-taking selloff in technology and energy stocks, the Dow plunged as much as 328 pts to 31285 before ending -119 pts at 31493, as investors were discouraged by worse-than-expected jobless claims, weak forecast from Walmart, and concerns over the specter of higher borrowing costs amid surging bond yields to one year high.

Malaysia. Mirroring a fall in regional markets and a resumption of foreign selling, KLCI tumbled 19.5 pts to 1575.8 to record its 3rd consecutive decline. Market breadth was negative as losers 823 edged gainers 448 with a total of 14.5bn shares traded valued at RM6.7bn. Local retailers (+RM200m) were the main net buyers whilst the local institutional (-RM10m) and foreign investors (-RM190m, net sold for the 3rd straight sessions) were the major net sellers.

TECHNICAL OUTLOOK: KLCI

We expect KLCI to engage in an extended consolidation (with key support at 1561) following a breakdown below the key downtrend line from the 1696 peak and a failure to break above the key 1618 hurdle. Failure to hold at 1561 levels could trigger further selloff towards 1545 (200D SMA) and 1500 territory. Stiff resistances are now pegged at 1588 1588 (downtrend line), 1600 and 1618 territory.

MARKET OUTLOOK

Ahead of the ongoing 4Q20 reporting season, KLCI is vulnerable to further consolidation after faltering below major 1600 and 1588 (downtrend line from the 1696 peak) supports, with the technical indicators turning negative again. Nevertheless, downside risk could be limited near 1545-1561 zones on the back of the Fed’s dovish outlook, huge US stimulus package, falling Covid-19 infections globally, and the planned vaccination programme in Malaysia starting from 26 Feb.

Source: Hong Leong Investment Bank Research - 19 Feb 2021