MARKET REVIEW

Global. Asian markets ended mixed as curbs to contain a resurgence Covid-19 outbreak due to more contagious variants fuelled worries that the region's nascent economic recovery will be tempered. Sentiment was also dampened by slower China’s factory output growth and retail sales in April. After tumbling as much as 206 pts, the Dow cut some losses to 54 pts at 34327 as investor bets on cyclical stocks against growth stocks amid persistent worries about inflation and a sooner-than-expected tightening by the Fed.

Malaysia. After rising as much as 10 pts to 1592.6, KLCI surrendered most of the gains to end +0.9 pts at 1583.6. Market breadth was extremely bearish (Gainers: 195; Losers 1061) as sentiment was sparked by concerns that a stricter MCO could be implemented in Selangor (the country's major economic hub) if the state fails to curb the spread of Covid- 19, as well as heightened geopolitical risks in the Middle East. Foreign investors were the net sellers for the 4th day (-RM74m; 22.1% of trading value) whilst local institutions and retailers net bought RM70m (40.3% of trading value) and RM4m (37.6% of trading value) in equities, respectively.

TECHNICAL OUTLOOK: KLCI

We reiterate our short to mid-term range bound consolidation mode (4-8 weeks) for KLCI, with regular pockets of volatility. On the upside, overhead resistances are situated at 1600- 1623 levels. Only a successful breakout above these hurdles would spur a fresh run towards 1642-1652-1670 levels. Conversely, a breakdown below 200D SMA near 1577 would accentuate a bearish move towards 1564-1556-1534 levels.

MARKET OUTLOOK

We are keeping to short term sideways call for now as the KLCI continues to trade 1577 (200-day SMA) and 1600 psychological levels. The unwavering spread of Covid-19 infections locally and nationwide MCO 3.0 will continue to suppress any rebound potential as we are entering the peak of the May reporting season.

On stock selection, we see an attractive risk-reward proposition for EVERGRN (RM0.405, HLIB Research-BUY-TP RM0.68) after tumbling 23.6% from 52-week high of RM0.53. Despite current elevated raw material and freight cost, we opine that the strength in ASPs and strong demand across all its product segments will be able to support the group’s earnings going forward. Technically, sideways consolidation may prevail with key supports near RM0.40-0.39-0.375. A decisive push above the RM0.425 (mid BB) will enhance upward momentum towards RM0.45-0.485-0.50 levels.

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of the market volatility, we decided to square off MFLOUR (2.7% loss) on 17 May.

Source: Hong Leong Investment Bank Research - 18 May 2021