MARKET REVIEW

Global. Asian markets rose in the early trades, riding the cyclical upturn commodity wave amid aggressive Covid-19 vaccine rollouts and optimism of a faster economic recovery. However, profit taking capped the gains ahead of the Powell’s congressional testimony on higher inflation outlook and rising yields in the evening. The Dow reversed an early 363-pt loss to end +16 pts at 31537 after reassuring comments from Powell on Fed’s accomodative policy to support the economy. Powell is also optimistic that the US economy is set to return to more normal growth by end 2021 and viewed the soaring bond yields as economic optimism rather than inflation fears.

Malaysia. Despite positive news from the six-month extension on the IDSS suspension to end Aug and the start of the local vaccination program this week, KLCI fell 5.4 pts to 1565.0, pressured by selldown in gloves and banking stocks. Market breadth was muted as gainers 603 edged losers 602 with a total of 11.5bn shares traded valued at RM5.2bn. Local retailers (+RM136m) remained the main net buyers in the last 7 days whilst the local institutional (-RM29m) and foreign (-RM138m) investors were the major net sellers.

TECHNICAL OUTLOOK: KLCI

Unless staging a strong reclaim above 1584 (mid BB) and 1600 (downtrend line from 1696 peak) zones, KLCI’s near term downward consolidation could persist, with critical H&S neckline support at 1561 levels. A decisive breakdown below this threshold could trigger a deeper slide towards 1549 (200D SMA), 1528 (50W SMA) and 1500 psychological levels, with an eventual H&S objective at 1430 zones. On the flip side, a successful breakout above the congested 1588-1600 levels will encourage more upside towards 1618 and 1646 (14 Jan high) zones.

MARKET OUTLOOK

Tracking profit taking consolidations in Wall St and regional markets while awaiting more clues on local corporate earnings front, KLCI is still vulnerable to further fall as the index is unable to surpass the congested 1584-1600 resistances. Nevertheless, downside risk seems limited near 1561-1549-1528 levels ahead of the planned vaccination programme in Malaysia starting 26 Feb. On stock selection, given PPHB (RM1.02-Not-rated) steady 4Q20 results (+8.7% QoQ and +14.7% 12MYTD) and solid balance sheet (NCPS of RM0.25 and BVPS RM1.45), a successful downtrend line breakout above RM1.04 will spur prices higher to RM1.10-1.16 levels. Key supports are pegged at RM0.98-0.93 zones.

Source: Hong Leong Investment Bank Research - 24 Feb 2021