MARKET REVIEW

Malaysia. In tandem with weak regional markets, KLCI slipped 9.5 pts to 1616.7, led by profit taking pullback in recovery stocks such as banking, telco, plantation and gaming sectors . Market breadth turned lower for a 2nd session as the G/L ratio decline to 0.53 as 744 losers thumped 392 gainers whilst trading volume fell 1.4bn to 7.6bn shares valued at RM4n. The local institutional (+RM3m; 5D: -RM251m) and retailers local retailers (+RM26m; 5D: +RM407m) were the net buyers whilst the foreign (-RM29m; 5D: -RM156m) investors returned as major net sellers for a 2nd session.

TECHNICAL OUTLOOK: KLCI

Following a technical rebound from a low of 1557 to a high of 1642, KLCI has been trending lower on profit taking to finish at 1616 yesterday. Barring a decisive fall below our lower trend line of the handle near 1600, we still see a cup & handle pattern taking form here. Taking out the handle pattern at 1642 will bode well for the stock to advance further towards 1658 (200W SMA) levels. However, failure to defend the said support levels could pose downside risks to the market in the short term, pressuring the index to revisit 1580-1568 levels.

MARKET OUTLOOK

As stability returns to Wall St overnight amid easing US 10Y Treasury yield and Fed’s pledge of a prolonged accommodative policy, global markets may continue to witness a fresh bout of volatility as central banks struggle to hold inflation in check while sustaining uneven economic growth as WHO says most regions of the globe are seeing an increase in Covid cases as variants spread. Weekly resistances are pegged at 1646-1660 whilst supports are situated near 1600-1618 territory

On stock selection, we believe the mid-to-long-term outlook for Mah Sing (HLIB Research BUY- TP RM1.15) remains positive premised upon its commendable take-up of recent launches, cover ratio of 1.4x to provide earnings visibility and a dividend payout ratio of 40%. We also find Mahsing in a sweet spot at this juncture as they get to ride on the new earnings stream from glove manufacturing amid sustainable demand from the permanent structural shift in hygiene awareness. The stock is trading at undemanding 9.3/6.8x FY21/22 P/Es, supported by attractive FY21/22 DYs of 4.6-6.5%. Technically, the stock is poised for a LT triangle breakout. A successful breakout above RM0.875 (12 March high) will lift prices higher towards RM0.92-0.975. Key supports are pegged at RM0.80-0.78-0.75 levels.

Source: Hong Leong Investment Bank Research - 23 Mar 2021