MARKET REVIEW

Global. Tracking Dow’s record high overnight, Asian markets ended mildly higher as the prospect of rising inflation spurred a surge in commodity prices and led investors into economically-sensitive stocks on the reflation trade, overshadowed a resurgence of Covid- 19 infections in India and parts of the Asian countries that may dampen the economic growth. Ahead of the key US jobs data report tonight, the Dow closed at a fresh record high (+318 pts to 34548), boosted by an upbeat weekly jobless claims, falling to a fresh pandemic low as labour-market conditions continued to improve and the economy reopened more broadly. Investors were awaiting for a more comprehensive non-farm payrolls report for clues on the strength of the labour market, which may potentially influence the Fed's stance on monetary policy (next FOMC meeting falls on 15-16 June).

Malaysia. KLCI slid as much as 19.7 pts to 1556 as MCO was re-introduced to more districts amid spiking Covid-19 infections. Nevertheless, bargain hunting activities especially on the glove heavyweights lifted the index to end +2.7 pts to 15787.3, snapping its 4-day losing streak. Market breadth was bearish as 772 losers thumped 369 gainers (the G/L ratios fell below 1 for the 7 straight days) with a total of 6.2bn shares transacted valued at RM4.5bn. Local institutions (-RM105m; 43.2% of trading value) joined foreign investors (- RM38m; 15.7% of trading value; net sold for the 7th straight day) as the major net sellers whilst retailers net bought RM143m shares (41.1% of trading value).

TECHNICAL OUTLOOK: KLCI

After plunging 67 pts in 7 days, KLCI finally staged a long awaited 2.7-pt technical rebound to end at 1578, a tad above the key 200D SMA. In the wake of a bullish Wall St overnight and a hemmer candlestick formation, KLCI may resume its relief rally today towards stiff barriers at 1600-1607. A successful breakout above these congested resistances will spur prices higher towards 1623-1642 levels. Conversely, a breakdown below 200D SMA or 1577 will see further selldown towards 1556-1550 zones.

MARKET OUTLOOK

In tandem with the buoyant Wall St performance overnight, KLCI may continue the technical rebound today amid bargain hunting activities on bashed down recovery and glove stocks, supported by the positive hammer candlestick formation. Nevertheless, any rebound is likely to be capped near 1600-1607 levels as market sentiment will remain jittery during this May reporting season amid worries over low vaccine supplies and economic impact from a prolonged MCO due to the gravity of the local COVID-19 situation. Moreover, more Fed officials are warning that current surging asset prices are posing increasing threats to the financial system, triggering potential correction should risk appetite fall.

Source: Hong Leong Investment Bank Research - 7 May 2021