MARKET REVIEW

Global. Asian markets ended mixed in subdued trades following holidays in major financial markets of China and Japan. Sentiment was also dampened by new Covid-19 waves in India and some Asian countries that may threaten global economic recovery. Dow tumbled as much as 348 pts in early trade ahead of the key US jobs data report (this Friday) and comments from Yellen that rate hikes may be needed to stop the economy from overheating. However, the Dow recouped all the losses to end +20 pts at 34133 as Yellen said she wasn’t predicting or recommending rate hikes. Meanwhile, Nasdaq slid 2% as investors continued to shift from the pandemic winners to cyclical stocks.

Malaysia. Tracking overnight gains on Wall St, KLCI jumped as much as 6.7 pts in early trades but profit taking ahead of the MCO announcement (after 5pm) saw the benchmark surrendered early gains to end -2.5 pts at 1588.3. Market breadth was mixed as 529 losers edged 524 gainers (G/L ratios fell below 1 in the last 5 days) with a total of 7.5bn shares transacted valued at RM4.1bn. Local institutions (+RM51m; 43.3% of trading value) were the major buyers whilst retailers (-RM50m; 45.3% of trading value) replaced foreign investors (-RM1m; 12.5% of trading value) as the major net sellers.

TECHNICAL OUTLOOK: KLCI

Following several unsuccessful attempts to clear the sloping resistance and the Tweezers Top formation, the bears seem to have an upper hand now. We would only turn positive if the benchmark can close above the downtrend resistance (now at 1605) successfully. A successful breakout above 1605 would confirm the next rally is underway towards 1618- 1642-1654 (200W SMA) barriers. On the flip side, a decisive fall below the crucial 1577 (200D SMA) support may trigger further selloff towards 1564-1557 zones.

MARKET OUTLOOK

After soaring 28 pts in April, will the adage “sell in May and go away” apply this year? To recap, KLCI experienced an average -0.7% return in May with 12 declines vs 8 gains for the past 20 years. We believe current weak technical posture after failing to reclaim above the downtrend resistance may see the index in jittery mode during this May reporting season. Overall, sentiment will remain cautious today as investors weigh the potential wave 4 Covid-19 infections in Malaysia and the re-introduction of MCOs across six districts in Selangor to curb the outbreak. Key supports are pegged at 1577-1557 while resistances are near 1605-1618 zones.

Source: Hong Leong Investment Bank Research - 5 May 2021