MARKET REVIEW

Global. Asian markets slid, led by routs in TWSE (3.8%), NIKKEI (3.1%) and HSI (2%) following a tech-led slump in Wall St as recent surge in commodity prices further heightened inflation worries. Ahead of the widely watched US CPI data tonight, the Dow skidded as much as 667 pts before paring the losses to 473 pts at 34269 as rising commodity prices and labour shortages fed fears of inflation and higher interest rates. Meanwhile, tech stocks showed signs of life as investors swooped in to take advantage of the recent dive, as the Nasdaq ended -12 pts at 13389 after sinking as much as 294 pts.

Malaysia. Tracking overnight Wall St dismal performance and national MCO 3.0 lockdown, KLCI tumbled as much as 11.9 pts before paring the losses to 6.3 pts at 1577.6 following the smaller contraction of 1Q21 GDP of -0.5% YoY (4Q20: -3.4%). Market breadth was bearish as 920 losers thumped 199 gainers with a total of 5.5bn shares transacted valued at RM2.9bn. After net bought RM225m equities last week, local retailers (-RM75m, 40.6% of trading value) joined foreign investors (-RM68m, 16.2% of trading value) as net sellers whilst local institutions (+RM143m; 43.2% of trading value) turned net buyers for a 2nd consecutive Day.

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, with key support at 1577 (200D SMA). Failure to find support at this level will accentuate a bearish move towards 1556-1544-1534 zones. Conversely, a successful breakout above 1600 will spur the benchmark higher towards 1610-1623 zones.

MARKET OUTLOOK

Taking cues from skittish Wall St performance overnight, nationwide MCO 3.0 and extended Hari Raya holidays, KLCI is likely to witness further selling pressure in a half-day trading session today. Nevertheless, as the MCO 3.0 is viewed as less economic-damaging compared with MCO 1.0 given that all economic sectors are allowed to operate, as well as cautiously optimistic BNM outlook on Malaysia economy (despite the MCO 3.0), 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 further wild swings.

On stock selection, we are turning bullish on PBBANK (RM4.10; HLIB Research-BUY- TP RM4.50) given price weakness over the past 2 months. Also, its strong asset quality may attract investors to take shelter in a more defensive banking stock, especially with MCO 3.0 uncertainties. Technically, the better-than-expected 1Q21 results and grossly oversold indicators may cushion further downside, with key supports situated at RM4.00-3.90-3.85. A decisive push above the RM4.20 (50D SMA) resistance will enhance upward momentum towards RM4.38-4.50 levels.

Source: Hong Leong Investment Bank Research - 12 May 2021