MARKET REVIEW

Global. Tracking last Friday’s weak performance in Wall St, Asian markets fell after recent record rallies amid concerns over policy tightening following surging Treasury yields and lofty equity valuations. The Dow slid as much as 208 pts to 31286 amid rising government bond yields on expectations for a faster recovery and a pick-up in inflation. However, the Dow staged a strong rebound to end +27 pts to 31521 amid bargain hunting on value stocks like energy, financials and industrials as expectations for further stimulus and the ongoing reduction in virus cases stoked optimism over the economic outlook.

Malaysia. Tracking sluggish regional markets, KLCI declined 14.5 pts amid renewed selldown by glove counters in the wake of the falling Covid-19 cases globally due to vaccines’ rollout. Market breadth remained negative (G/L ratio fell below 1 for the 4th

sessions) as losers 754 thumped gainers 476 with a total of 13.3bn shares traded valued at RM5.7bn. Local retailers (+RM136m) were the main net buyers followed by local institutional (+RM31m) whilst the foreign investors (-RM225m) were the major net sellers.

TECHNICAL OUTLOOK: KLCI

Unless staging a strong breakout above the 1600 downtrend resistance (from 1696 peak), KLCI’s near term downward consolidation (with key supports at 1548 -1561) is likely to persist after tumbling 14.5 pts yesterday, underpinned by the long black candlestic k and hook-down in technical oscillators. Failure to hold at these supports will trigger further slump towards 1530 (lower channel) and 1500 territory. On the flip side, only a strong breakout above the congested 1600-1618 levels will spur greater upside higher towards 1646 (14 Jan high) zones.

MARKET OUTLOOK

Tracking profit taking consolidations in Wall St and regional markets while awaiting more clues on corporate earnings front, KLCI is vulnerable to further fall as the index is unable to surpass the congested 1600-1618 resistances. Nevertheless, downside risk seems limited near 1548-1561 levels on the back of the planned vaccination programme in Malaysia starting 26 Feb. Sector-wise, banks, O&G, construction, ICT and technology should be the preferred choices for outperformance as economic recovery plays gain traction on vaccine rollout optimism.

Source: Hong Leong Investment Bank Research - 23 Feb 2021