MARKET REVIEW

Global. Despite an upbeat China factory data, most Asian markets ended mixed as sentiment was weighed down by resurgence in Covid-19 cases and elevated bond yields hovered near a 13-month peak. Ahead of the widely anticipated FOMC meeting on 17-18 March (Malaysian time), the Dow continued its record closing (+174 pts to 32953) as the approved USD1.9 trillion stimulus bill and the aggressive rollout of Covid-19 vaccinations stoked a bullish mood.

Malaysia. After a back-to-back decline of 24 pts, KLCI gained 5.2 pts at 1620.9 amid bargain hunting activities on selected gaming, telco, O&G and banking stocks. Trading volume was 10.3bn shares valued at RM5.2bn whilst market breadth remained positive for a 5th day as 611 gainers edged 586 losers. The local institutional investors were the major sellers (-RM168m; 5D: -RM606m) whilst local retailers (+RM142m; 5D: +RM276m) and foreign investors (+RM26m; 5D: +RM330m) were the net buyers.

TECHNICAL OUTLOOK: KLCI

Barring a decisive fall below our envisaged 1590-1600 supports, we remain optimistic that the benchmark will retake the next 1646-1660 (200W SMA) resistances after a brief sideways consolidation. On the flip side, failure to keep the 1590/1600 support levels could result in more choppiness in the short term, with lower downside risks at 1560-1580 levels.

MARKET OUTLOOK

Bursa Malaysia is expected to trade in cautious mode (within a 1600-1638 range) ahead of the FOMC meeting on 17-18 March as investors are trying to front-run the next phase of the cycle after a sharp recovery from Covid-19 paralysis, pencilling higher inflation and expecting the timing of the beginning of a new tightening policy. Nevertheless, we believe any severe fall will be cushioned by the economic recovery optimism as Malaysia had kicked off its vaccination program and high Brent oil and FCPO prices, coupled with the declining daily confirmed Covid-19 cases locally.

On stock selection, we advocate buying on dips on GDB (HLIB Research-BUY-RM1.32 TP). Valuation has turned more attractive after falling 18% from an all-time high of RM1.08 (22 Jan) to RM0.885 yesterday, with key supports situated at RM0.87-0.85-0.83 levels. Ex netcash/share of RM0.13, the stock is only trading at 8.1x FY21E P/E, supported by its sector-leading ROEs and strong outstanding order book of RM2.1bn (a healthy 5.7x cover and could sustain earnings visibility for the next 3 years). A strong reclaim above RM0.915 (50D SMA) will spur greater heights towards RM0.975-1.00-1.08 territory.

VIRTUAL PORTFOLIO POSITION-FIG1

Yesterday, we took profit on our virtual portfolio stocks i.e. AMBANK (+19.2% gain) and TRIMODE (+6% gain) after hitting their R1 upside targets.

Source: Hong Leong Investment Bank Research - 22 Mar 2021