MARKET REVIEW

Global. Tracking overnight strong rebound from Wall St, Asian bourses rose after Fed’s Chairman soothed nerves over rising US bond yields (mainly driven by economic optimism rather than inflation fears) and calmed inflation worries by reassuring markets for a 2nd day that interest rates would be left unchanged for now. Despite reassuring dovish comments by Powell, Wall St plunged overnight as lofty valuations of the tech-heavy Nasdaq slid 3.5% to 13119 (its worst day in nearly four months), as a sharp 0.14% spike in US 10Y yield exacerbated fears about high-valued growth sectors and triggered selling across tech. The Dow also fell 1.76% to 31402 whilst the S&P 500 faltered 2.5% to 3829.

Malaysia. Tracking regional markets’ rebound amid Powell’s pledge of dovish policy and optimism of the national vaccination program rollout this week, KLCI jumped 24 pts to 1581.5. Market breadth was bullish as gainers 857 led losers 402, supported by a total of 10.4bn shares traded worth RM6.6bn. After 7 days of consecutive net selling, foreign investors (+RM144m) together with local retailers (+RM91m) were the net buyers whilst local institutional net sold RM235m shares, the biggest outflow since –RM429m on 8 Jan.

TECHNICAL OUTLOOK: KLCI

Unless staging a strong reclaim above 1595 (downtrend line from 1696 peak) and 1618 zones, KLCI is likely to trap in the downtrend channel for now, as the overnight slide on Wall St could witness potential selldown to retest the critical 1560 (H&S neckline support) and 1550 (200D SMA) supports. A decisive breakdown below these levels will trigger further slump towards 1535 (lower downtrend channel) and 1500 levels eventually. On the flip side, a successful breakout above the congested 1595-1618 resistances will encourage more upside potential to 1646 and 1661 (200W SMA) zones.

MARKET OUTLOOK

Despite rebounding 24 pts to 1581.5 yesterday after tumbling 51 pts in the last 7 sessions, KLCI is still vulnerable to further consolidation on the back of recent multiple supports breakdown, awaiting more clues on local corporate earnings front and a slump on Wall St overnight. Nevertheless, severe downside risk may be cushioned by an oversold slow stochastic reading, Fed’s dovish outlook, huge US stimulus package, falling Covid-19 infections globally, and the planned vaccination program in Malaysia. Crucial supports are situated near 1535-1550 levels whilst resistances are pegged at 1600-1618.

Source: Hong Leong Investment Bank Research - 26 Feb 2021