MARKET REVIEW

Global. Tracking a bullish Wall St last Friday, booming commodities’ prices and stronger regional currencies (vs moderating USD), Asian markets ended higher as a sluggish US April job data reinforced expectations for more stimulus and eased concerns about tapering and normalisation in monetary policy. Overnight, the Dow surged as much as 314 pts to another record high of 35091 before surrendering its entire gains to end -35 pts to 34743, led by a slump in technology stocks (Nasdaq slid 2.6%). Sentiment was alarmed by inflation and interest rates angst as recent skyrocketing commodity prices stoked concern of an eventual spike in inflation that could derail a strong rebound in the US economy.

Malaysia. In line with positive regional markets, KLCI climbed as much as 4 pts to 1591.5 before giving up all the gains to end -3.5 pts at 1583.9, dampened by heightened concerns that the latest MCO 3.0 restrictions and potential delay in Phase 3 vaccination pace will drag the domestic economic recovery momentum. Market breadth turned bearish as 845 losers thumped 297 gainers with a total of 6bn shares transacted valued at RM3.5bn. Foreign investors turned net sellers again (-RM37m, 15% of trading value) whilst local institutions (+RM26m; 43.8% of trading value) and retailers investors (+RM11m; 41.3% of trading value) were the major net buyers of equities.

TECHNICAL OUTLOOK: KLCI

We reiterate that as long as the downtrend resistance (now at 1600) is not taken out successfully, the bears are still firmly in control now, with key support at 1577 (200D SMA). A sharp fall below 1577 will trigger further kneejerk sell down towards 1556-1544-1534 levels. Conversely, a successful breakout above 1600-1610-1623 zones.

MARKET OUTLOOK

Taking cues from a bearish Wall St performance overnight and PM’s announcement that Malaysia will be placed under MCO from 12 May to June 7 as the country grapples with rising Covid-19 infections, KLCI is likely to witness further kneejerk selling (especially recovery plays) during this holiday-shortened week (Wednesday half-day trading; Thursday and Friday Hari Raya holidays). Nevertheless, as the MCO 3.0 is viewed as less economic damaging compared with MCO 1.0 given all economic sectors are allowed to operate (with strict SOP compliance), any sell down is likely to be cushioned near 1556-1545-1535 levels. In the short term, investors could continue to re-position into more defensive sectors (namely utilities, telco and glove makers) in anticipation of a choppy ride

On stock selection, following a below par 3Q21 results and a more cautious outlook given by its management (vs its peers), SUPERMX (RM4.63-Not-rated) share price had plunged 17% in three days and 38% from YTD high. Currently, the stock is trading at undemanding FY23 P/E of 9.3x (consideringa more balanced supply-demand environment post pandemic, we use consensus FY23 EPS of 50sen), which is trading at 43% discount compared with average 5Y P/E of 16.3x. The stock is also offering a FY23 dividend yield of 4.8%. Technically, the risk-reward ratio has become more attractive after recent rout and grossly oversold indicators, with key supports situated at RM4.40 -4.30-4.10. A decisive push above the RM4.80 resistance will enhance upward momentum towards RM5.00-5.20- 5.40 levels.

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of the market uncertainty ahead of the long Hari Raya holidays and expanded MCOs, we decided to square off our virtual portfolio stocks i.e. LHI (0% return) and LAGENDA (6.6% loss) on 10 May.

Source: Hong Leong Investment Bank Research - 11 May 2021