MARKET REVIEW

Global. Asian markets eased amid renewed bouts of elevated volatility as the US 10Y Treasury yield edged higher after the better-than-expected US PPI. Sentiment was also dampened by concerns over surging coronavirus cases, policy tightening in China arising from upbeat economic data, and the re-emergence of the US-China tensions. The Dow slipped 55pts at 33745 from last Friday’s record high, with investors waiting for cues from the upcoming corporate earnings season this week (S&P 500 earnings is expected to grow ~25% YoY) and a key inflation report later tonight.

Malaysia. Mirroring the poorer performance of regional markets, KLCI eased 3.8 pts at 1608.4, snapping three consecutive days of gains, mainly due to profit taking in telcos stocks after the surge last week following the Celcom-Digi mega-merger deal. Trading volume decreased 0.8bn to 6.6bn shares valued at RM3.4bn (-RM0.7bn vs 9 Apr) while market breadth turned negative as the G/L ratio deteriorated to 0.62 from 0.92 previously. Together with the renewed selling force from local institutions (-RM12m; 43.8% of trading value), foreign investors were the major net sellers for a 3rd consecutive day (-RM49m, 17.1% of trading value). Meanwhile, the retail investors emerged as the net buyers for the 3rd straight session (+RM61m; 39.1% of trading value).

TECHNICAL OUTLOOK: KLCI

After logging 27 pts weekly gains, KLCI eased 3.8 pts to 1608 yesterday, still closing above multiple key SMAs. We reiterate that only a successful breakout above 1620 downtrend resistance (from 52-week high1696) will spur KLCI higher towards 1635-1646-1656 (200W SMA) zones. Conversely, a fall below 1600 (uptrend line from 1452) will aggravate further retracement towards 1593 and 1573 territory.

MARKET OUTLOOK

The bull could face stiff hurdles at 1620 (downtrend resistance from 1696) and 1635 (18 Mar high) zones, ahead of the start of earnings reporting season in the US and major economic data (eg inflation, GDP, retail sales etc) from the US and China this week, coupled with the new wave of Covid-19 cases at major hot spots like the US, Europe, Brazil and India, Overall, present range bound consolidation mode may prevail, with major supports are situated at 1600-1590-1573 levels.

For stock selection, we expect HOHUP (RM0.46-Not rated) to rebound further from RM0.40 (YTD low) after successfully placed out two tranches of private placements on 5 Feb (47.7m shares@ RM0.38) and 19 March (34.8m shares@RM0.395), raising about RM31.9m for working capital and repayment of borrowings. Downside risk is limited as major shareholder Insas, continued to accumulate shares from DBT and open market from 19 Feb to 6 Apr (holding 70m shares or 14% stake now).

HOHUP is trading at 0.44x P/B and 3.8x trailing P/E. The bullish triple bottom formation may spur prices higher towards major resistances at RM 0.50-0.525-0.57 whilst supports are pegged at RM0.45-0.42-0.40 levels.

Source: Hong Leong Investment Bank Research - 13 Apr 2021