MARKET REVIEW

Global. Asian markets ended mostly in positive territory as investors continue to anticipate a dovish Fed during the 28-29 Apr FOMC meeting, as well as bullish expectations of ongoing US 1Q21 reporting season, overshadowed the surging Covid-19 infections worldwide. The Dow shed 62 pts on profit taking at 33981 whilst the S&P 500 (+9 pts to 4189) and Nasdaq (+122 pts to 14138) closed at record highs, fuelled by buoyant outlook ahead of a deluge of earnings reports this week, and further expectations that the Fed will stick with its market-friendly policy.

Malaysia. KLCI ended +15 pts at 1623.4, spurred by the strong gains on glove makers amid the resurgence of Covid-19 infections worldwide and bargain hunting on banking stocks after recent pullback. Despite the gains, market breadth was weaker as the G/L ratio eased to 1.03 from 1.20 last Friday. Across the board, trading volume expanded to 8.3bn shares worth RM5.6bn vs 6.55bn shares worth RM5bn last Friday.

Domestic institutions were major net sellers (-RM165m; 46.6% of trading value) after net buys RM318m equities last week. Foreigners turned net buyers (+RM150m; 13.6% of trading value) after offloading RM490m last week, whilst retailers also emerged as net buyers (+RM15m; 40% of trading value) after disposing RM12m shares on 22-23 Apr.

TECHNICAL OUTLOOK: KLCI

Following a strong breakout yesterday above the downtrend resistance (from 1696 high) and hook-up in technical indicators, the bulls may kick start a fresh rally towards 1635-1642 levels before heading towards more formidable 1654 (200W SMA), 1674 (top monthly BB) and 1696 hurdles. On the flip side, a breakdown below the 1609 (downtrend channel) resistance-turned-support may trigger renewed sell down to 1600-1590-1577 zones.

MARKET OUTLOOK

In a holiday-shortened week (Nuzul Al’Quran holiday on 29 Apr), escalating Covid-19 cases globally should sustain active interest in glove stocks whilst selected bargain hunting on the selldown recovery stocks may bode well for further KLCI technical rebound. Meanwhile, the FOMC meeting outcome (29 Apr at 2am) may draw investors’ focus for clues on tapering of QEs and policy tightening in light of the recent strong US economic data. Major supports are situated at 1609-1600-1590 whilst resistances are pegged at 1642-1654-1674 zones.

On stock selection, after plunging 36% from 52-week high of RM0.715 (5 Oct) to a low of RM0.46 (1 Apr), DNONCE (RM0.48; Not-rated) is drifting sideways before closing at RM0.48 yesterday. Overall, DNONCE’s prospects remain bright as it continues to ride on growth from the healthcare (serving major glove producers based in Thailand by supplying packaging materials) and E&E sectors (serving the semiconductor and memory drive manufacturers by providing cleanroom services, box-Build assembly and plastic components parts).

Tracking relief rally on glove makers and hook-up in technical indicators, DNONCE may stage a bullish downtrend resistance breakout soon. A successful breakout above RM0.50 (downtrend line from RM0.715) will spur prices towards RM0.53 -0.585-0.60 targets. Supports are pegged at RM0.46-0.45-0.42 levels.

VIRTUAL PORTFOLIO POSITION-FIG1

Due to the mixed technicals, we decided to square off our virtual portfolio stocks i.e. HSSEB (5.9% gains) and ECONBHD (5% loss) yesterday.

Source: Hong Leong Investment Bank Research - 27 Apr 2021