MARKET REVIEW

Global. Asian markets ended mixed as investors continue to grapple with the corporate earnings as the season gets underway alongside the elevated market valuations and alarming rise in the Covid-19 cases globally. Despite falling US10Y Treasury yield, the Dow plunged 256 pts or 0.8% to 33821 (off all-time high of 34256 last Friday), as cyclical stocks were hit hard amid soaring equity valuations and surging Covid -19 cases muddied the outlook for global growth, and offset another wave of mostly bullish 1Q21 earnings.

Malaysia. Contrary to the mixed regional markets, KLCI staged a 7.3-pt technical rebound to 1607.6, underpinned by bargain hunting on recovery stocks in the banking, gaming, telco, transportation and utilities, offset the pullback in glove stocks after the recent rally. Sentiment stayed weak although the G/L ratio inched up to 0.88 from 0.54 previously. Local institutions (-RM37m; 46.4% of trading value) were the major net sellers whilst retailers (+RM10m; 38.1% of trading value) and foreigners (+RM27m; 15.5% of trading value) emerged as net buyers.

TECHNICAL OUTLOOK: KLCI

Unless staging a successful breakout above 1613 (sloping trendline from 1696), KLCI is likely to be trapped in sideways consolidation for a while (supports: 1598-1585-1576 levels). Only a successful breakout above 1613 will reignite a fresh rally to retest 1620- 1635-1646 zones. On the flip side, a sharp fall below 1598 (mid BB) will trigger further downward pressures to 1585-1575 levels.

MARKET OUTLOOK

Given the resurgence of Covid-19 cases worldwide with new variants that are more resistant to prevailing vaccines, economic recovery plays could face some challenging times ahead due to high valuations after the recent surge whilst the healthcare related, especially rubber glove stocks, may attract buying interests amid fears over an exponential rise in global infections from more infectious strains. Major supports are pegged at 159 8- 1585-1575 whilst resistances are situated at 1613-1620-1635 zones.

On stock selection, KOSSAN (RM3.80, HLIB Research-BUY-TP RM5.22) may attract bargain hunters following its robust 1Q21 results and generous 1st interim 12sen dividend (ex-date 6 May) coupled with the global resurgence in Covid-19 cases to cement strong demand for their products given the threat of exponential infections from more virulent strains. Technically, the stock is in the midst of forming a rounding bottom pattern before heading higher towards RM4.00-4.25-4.45 levels. Key supports are situated at RM3.50- 3.70.

Source: Hong Leong Investment Bank Research - 21 Apr 2021