MARKET REVIEW

Global. Asian markets ended higher in early trades as investors cheered Biden’s impending infrastructure spending plans and more aggressive vaccination efforts coupled with the traffic resumption in the Suez Canal, offsetting worries from Archegos’ downfall that hit international banking stocks last Friday. The Dow fell 104 pts to 33067 from recent record highs, as major technology shares came under pressure after the US 10Y Treasury yield surged to 14M high at 1.77% (before closing -0.01% at 1.71%) amid vaccine rollouts and expected infrastructure spending boosted the outlook for a broad economic recovery and rising inflation. Meanwhile, the Nasdaq Composite ended 14 pts lower at 13045, after tumbling as much as 137 pts from 12922.

Malaysia. KLCI slipped as much as 10.2 pts to 1601.1, led by selldown in KLCI-linked glove makers, as investors weighed on the US CBP’s directive to begin seizing disposable gloves produced by Top Glove. However, the index pared its losses to -2.1 pts at 1609.2 following news that FTSE Russell’s decision to retain Malaysia’s membership in the WGBI coupled with the potential 1Q21 window dressing activities. Market breadth was negative as losers thumped gainers by 649 to 414 stocks. The local institutional (-RM147m; 5D: - RM375m) investors were the major sellers whilst the retailers (+RM 119m; 5D: +RM253m) and foreign (+RM28m; 5D: +RM122m) investors were the major buyers.

TECHNICAL OUTLOOK: KLCI

After sliding 57pts from March’s high of 1642 (10 March) to a low of 1585 (24 March low), KLCI staged a steady rebound to finish at 1609 yesterday. The benchmark is still trapped in a triangle consolidation. A successful clearance above 1618-1630 hurdles will spur prices higher towards 1646-1658 zones. On the flipside, failure to hold at 1585-1600 supports will accelerate further selling pressure to retest 1569-1557 territory.

MARKET OUTLOOK

In the wake of Suez Canal’s traffic resumption, FTSE Russell’s decision to retain Malaysia’s membership in the WGBI coupled with potential 1Q21 window dressing activities, KLCI may retest 1618-1630 zones in the near term, barring any breakdown below 1590 (support trend line from 1452 low). On stock selection, we like VS (HLIB Research –BUY-RM3.44 TP) as the biggest EMS player in Malaysia with solid track record, underpinned by a healthy order outlook brought by the steady demand of consumer electronic products and margin expansion from customer diversification efforts coupled with a major beneficiary of the prolonged US-China trade diversion. Technically, the stock is poised for a triangle breakout soon following strong 2Q21 results. Key resistances are pegged at RM3.00 -3.13-3.37 whilst supports are situated at RM2.72-2.64-2.54 levels.

Source: Hong Leong Investment Bank Research - 31 Mar 2021