MARKET REVIEW

Global. Asian markets ended mixed after recent rallies as upbeat economic data raised worries of a premature policy tightening and growing concerns of a resurgence of Covid-19 infections and slow vaccinations. The Dow slipped 97 pts to 33430 on profit taking after another record close in the previous session. Sentiment turned cautious as investors digested recent good news and await the upcoming 1Q21 earnings season (S&P 500 profit is expected to grow 24& YoY).

Malaysia. KLCI eased 5.3 pts to record its 2nd straight decline, weighed down by losses in plantation, telco, banking and oil& gas stocks while glove heavyweights rebounded due to fears of the 3rd wave of Covid-19 infections worldwide. Trading volume dropped 1.5bn to 7.8bn shares valued at RM3.2bn whilst market breadth was negative as the G/L ratio fell to 0.58 after recording above 1 in the last three days. Foreign investors continued their net selling for a 2nd session as total net disposal jumped 129% to RM94m shares (5D: - RM428m; 16% of trading value). The local institutions turned net buyers after a 2-day selloff (+RM50m; 5D: +RM141m; 44.7% of trading value) whilst local retail investors’ net buying momentum fell 27% to RM44m shares (5D: +RM287m; 39.3% of trading value).

TECHNICAL OUTLOOK: KLCI

Following a 36-pt rout on 31 March, the technical rebound over the past couple of trading sessions was lacklustre as the KLCI failed to reclaim above the immediate 1596 (support trendline from 1452) and 1618 resistances successfully. Hence, the consolidation could be prolonged and the index could retest lower levels at 1571 (200D SMA) and 1557 territory before the bulls take charge again.

MARKET OUTLOOK

Given the lack of meaningful local fresh catalysts, KLCI could extend its consolidation with downside risks supported near 1571-1564-1557 zones amid oversold technicals. Stiff resistances are pegged at 1596-1618 zones. 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 worldwide, 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).

Source: Hong Leong Investment Bank Research - 7 Apr 2021