MARKET REVIEW

Global. Asian markets ended mixed in holiday -thinned trade (Australia, Taiwan, China and Hong Kong bourses were closed for holidays) as strong US jobs data raised worries the Fed may hike interest rates sooner than expected. Meanwhile, Indian’s SENSEX plunged 1.7% amid a resurgence of Covid-19 infections and slow vaccinations. The Dow (+374 pts to 33527) and S&P 500 (+58 pts to 4078) closed at record highs whilst the Nasdaq surged 225 pts to 13705 as solid US economic data and rapid vaccinations coupled with a mammoth USD2 trillion stimulus measures added to evidence the recovery is gaining momentum.

Malaysia. KLCI rose as much as 5.3 pts to 1590.7 following the news that the Cabinet has approved the MRT3 project but the gains were evaporated as the index fell 1.1 pts at 1584.2 amid a renewed selloff in glove heavyweights. Trading volume increased 0.9bn to 7.8bn shares valued at RM2.8bn whilst market breadth was mixed with 542 gainers vs 532 losers. The foreign (-RM41m; 5D: -RM305m; 12.7% of trading value) and the local institutional (-RM19m; 5D: -RM57m; 45.3% of trading value) investors were major net sellers while the retail investors (+RM60m; 5D: +RM362m; 42.0% of trading value) were major net buyers.

TECHNICAL OUTLOOK: KLCI

Following a 36-pt rout on 31 March, the technical rebound over the past couple of trading days was lacklustre as the index failed to reclaim above the immediate 1590-1600-1618 resistances successfully. In the wake of overnight bullish Wall St closings, the current rebound may still have a tad to go before the bears take charge again. We reiterate that only a successful reclaim above these hurdles will sustain the bullish rebound from 1452, and advance further at 1635-1642-1657 levels. Key supports are pegged at 1570 (200D SMA), 1557 (YTD low) and 1533 (20M SMA) levels.

MARKET OUTLOOK

On the back of the overnight bullish Wall St performance, KLCI may continue its oversold technical rebound to retest key resistances at 1590-1600-1618 zones 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 elevated US 10Y Treasury yields, vaccination hiccups, the 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).

In the wake of the recent relief rally in Nasdaq, we expect UCHITEC (HLIB Research – BUY- RM3.83 TP), a renowned original design manufacturer (ODM) of electronic control modules to stage further technical rebound to rest all-time high of RM3.55 (4 Mar) soon after staging a downtrend line breakout (on 2 Apr) and forming a strong base near RM3.00- 3.10 levels. A strong breakout above RM3.55 will spur prices higher towards RM3.67-3.80 territory. The stock is currently trading at 17.2x FY21E P/E with 5.1% DY and RM0.34 netcash (10% to share price).

Source: Hong Leong Investment Bank Research - 6 Apr 2021