MARKET REVIEW

Global. Asian bourses were lacklustre last Friday as surging Covid-19 infections in India and Thailand dampened risk appetite, while reports of a potential hike in capital gains tax in the US offset ongoing bullish US economic data and ongoing 1Q21 results season. The Dow rallied 227 pts to 34043 from Thursday’s 321-pt slump, following upbeat US April’s factory data and new home sales underscored a booming economy. 1Q21 reporting season to take centre stage this week when ~40% of the S&P 500 companies will release their earnings, which are expected to surge 33% YoY, the highest quarterly rate since the 4Q10.

Malaysia. KLCI ended +0.7-pt at 1608.4 (+0.1 WoW) as the gains on glove makers failed to spur the index to break above the downtrend resistance owing to the tepid performances by the banking stocks. Sentiment improved further as the G/L ratio inched up to 1.20 from 1.02 on Thursday with a total of 6.5bn shares changed hands valued at RM4.2bn.

Local institutions were the net buyers last Friday (+RM76m; 45.4% of trading value) compared with net selling by retailers (-RM10m; 40% of trading value) and foreigners (- RM66m; 14.6% of trading value). In the week ending 23 April, foreigners were net sellers with net weekly outflows of RM490m (vs -RM235m previously) whilst local institutions (+RM318m vs +RM137m previously) and retailers (+RM172m vs +RM98m previously) were the net buyers for a 2nd consecutive week.

TECHNICAL OUTLOOK: KLCI

We expect persistent volatility as the bulls and bears continue to engage in a tug-of-war near the 1610 (sloping trendline from 1696) territory. Immediate supports fall on 1599 (mid BB) and 1585 (30W SMA), with further critical floor near 1577 (200D SMA). Only a successful triangle breakout above the downtrend resistance at 1610 will reignite a fresh rally to retest 1621-1635-1646 zones.

MARKET OUTLOOK

In a holiday-shortened week (Nuzul Al’Quran on 29 Apr), defensive plays into healthcare related stocks should continue to shore up gloves companies while the recovery plays may trend sideways (after recent sharp rallies), given the spike in global coronavirus cases that may derail reopening economies and dampen earnings outlook. Meanwhile, the FOMC meeting outcome (29 Apr at 2am) may draw investors’ focus whether the recent strong US economic data would alter Fed’s dovish stance to a mildly hawkish outlook. Major supports are situated at 1599-1585-1576 whilst key resistances are near 1610 (downtrend resistance from 1696), 1621 (high BB) and 1646 (14 Jan high) zones.

Source: Hong Leong Investment Bank Research - 26 Apr 2021