MARKET REVIEW

Global. Despite a dovish stance from Fed, Asian markets ended mostly lower amid weaker-than-expected Chinese factory indicators, concerns about Beijing's clampdown on internet companies, and recent Covid-19 resurgence in the region. Following a hawkish remark by Robert Kaplan (Dallas Fed President) and economic data showing potential inflation pressures, the Dow slid 185 pts to 33874 (-0.5% WoW) while S&P 500 and Nasdaq lost 30 pts to 4181 (+0.0% WoW) and 120 pts to 13962 (-0.4% WoW), respectively amid profit taking consolidation in megacap stocks i.e. Apple, Alphabet, Amazon and Facebook.

Malaysia. Tracking lower regional markets and worries that domestic economic recovery growth remains tilted to the downside, primarily due to a spike in the Covid-19 infections and the slow vaccine registration rates, KLCI fell 6.9 pts to 1601.7 (-6.8 pts WoW). Market breadth was negative as 582 losers outnumbered 508 gainers with a total of 6.8bn shares transacted worth RM4.6bn. Local institutions (+RM134m; 41.2% of trading value) joined retailers (+RM83m; 39.5% of trading value) as the major net buyers whilst foreign investors (-RM217m; 19.4% of trading value) were net sellers for a 3rd straight day. In the holiday-shortened week, foreign investors net sold RM377m shares (-23% WoW) whilst local institutions and retailers net bought RM47m (-85% WoW) and RM330m (+91% WoW) equities, respectively.

TECHNICAL OUTLOOK: KLCI

Following several unsuccessful breakouts to clear the sloping resistance near 1608 (from 1696) last week, the bears seem to have an upper hand now amid a bearish long black pattern last Friday. We would only turn positive if the benchmark can overcome and close above the 1608-1621 levels successfully. A successful clearance above the hurdles would confirm the next rally is underway towards 1642-1654 (200W SMA) barriers. On the flip side, a decisive fall below the 1591 (50W SMA) support may trigger further sell down towards 1577 (200D SMA) and 1564 zones.

MARKET OUTLOOK

After soaring 28 pts in April, will the adage “sell in May and go away” likely apply to this year? To recap, KLCI experienced an average -0.7% return in May with 12 declines vs 8 gains in the past 20 years. In our view, the benchmark is likely to witness further volatility ahead, given the start of the 1Q21 reporting season, potential slowdown in economic recovery amid surging Covid-19 infections and further tightening of SOPs to curb the spread, and the weak technical posture (KLCI is still unable to stage a successful breakout above the key 1608-1621 overhead resistances). Key supports are pegged at 1591-1577- 1564 zones.

Source: Hong Leong Investment Bank Research - 3 May 2021