Market Review

Global. Asian markets ended higher in quiet trades as most bourses were closed for the Good Friday holidays, as investors were encouraged by Biden’s mammoth USD2.2 trillion infrastructure bill and recent solid PMI data in the US and China. While the Dow was closed for the Good Friday holiday, the Dow mini ended 153 pts higher, thanks to the broad -based robust March jobs data as more Americans got vaccinated and the government doled out additional Covid-19 stimulus packages.

Malaysia. Tracking higher regional markets and crude oil prices coupled with BNM’s optimistic stance on Malaysia’s economy, KLCI inched up 2.7 pts amid continuous bargain hunting activities on TOPGLOV, CIMB, PBBANK, AXIATA and TM. Despite the gains, KLCI slid 16.1 pts WoW to record its 2nd weekly losses. Trading volume eased 1bn shares to 6.9bn valued at RM2.9bn whilst market breadth remained positive as the G/L ratio eased to 1.53 from 2.22 on 1 Apr. The foreign investors (+RM39m; 5D: -RM173m; 16.5% of trading value) were the major net buyers for a 2nd consecutive day after a massive selloff of RM338m shares on 31 March. Meanwhile, the retail investors (-RM33m; 5D: +RM332m; 42.6% of trading value) and local institutional investors (-RM6m; 5D: -RM159m; 45.8% of trading value) were the major net sellers.

TECHNICAL OUTLOOK: KLCI

Following the bullish Harami pattern and overnight Wall St rally, KLCI continued its technical rebound for a 2nd straight session to end 2.7 pts higher at 1585.3. We reiterate that only a successful reclaim above immediate resistance near 1590 (uptrend line support from 1452), 1600 and 1618 levels will sustain the LT bullish rebound from 1452. Further major hurdles are situated at 1635-1642-1657 levels whilst supports are pegged at 1570 (200D SMA), 1557 (YTD low) and 1533 (20M SMA) levels. 

MARKET OUTLOOK

KLCI may continue its oversold technical rebound in the early week, taking cues from upbeat Wall St performance and global PMI manufacturing data. Key resistances are situated at 1590-1600-1618 whilst supports are pegged at 1570-1564-1557 levels. While we remain optimistic that 2021 will be a vaccine driven recovery year, we are cognizant that headwinds such as spiking US 10Y Treasury yields, vaccination hiccups, a 3rd wave of Covid-19 infections in the US and Europe, geopolitical tensions, rating downgrade risk and fluid domestic politics will bring much volatility along this recovery path. As such, we  advocate a more balanced 2Q21 portfolio proposition comprising recovery plays (Tenaga, RHB, DRB, MBM, IJMP, FocusP), volatility (Bursa), value (Sunway, Armada) and defensives (TM, Time, Axisreit).

Technically, we expect GDB (HLIB Research – BUY- RM1.32 TP) to stage a technical rebound soon after a long-legged Doji formation last Friday. Valuation is undemanding at 8.6x FY21E P/E (ex-RM0.13 netcash, P/E is 7.2x) supported by a robust RM2.1bn orderbook (translates into a healthy 5.7x cover and sustains earnings visibility for 2-3 years), strong sector-leading robust FY20-22E ROE of 28% (vs peers’ 12%) and a decent 3.8% FY21E DY. Key resistances are situated at RM0.85-0.88-0.92 whilst supports are pegged at RM0.785-0.75-0.725 zones.

Source: Hong Leong Investment Bank Research - 5 Apr 2021