MARKET REVIEW

Global. Led by relief rallies in TWSE (5.1%), NIKKEI 225 (2.1%) and HSI (1.3%), Asian markets ended mostly higher, brushing off a fresh surge in Covid-19 cases and tightening restrictions in some parts of Asia. The Dow rose as much as 80 pts in early trade before wiping the gains to end -267 pts at 34060 due to persistent worries over an overheating economy could prompt the Fed to rein in its monetary support amid soaring inflationary pressures. Sentiment stayed cautious as investors brace for the April FOMC meeting minutes tonight, which may offer clues on inflation pressure and hints of a timeline for tapering stimulus.

Malaysia. Tracking higher regional markets, KLCI jumped 7.9 pts to 1591.3 following late bargain hunting on O&G, telco and banking stocks. Market breadth was positive with gainers outnumbering decliners at 812 to 279. Foreign investors (+RM28m; 19.2% of trading value) and retailers (+RM4m; 37% of trading value) were major buyers whilst local institutions turned net sellers (-RM32m; 43.8% of trading value) in equities.

TECHNICAL OUTLOOK: KLCI

Although KLCI has staged a decent rebound following the Hammer pattern formation on 6 May, we reiterate our short to mid-term range bound consolidation view (4-8 weeks) for the index, 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 reiterate our short term sideways call for now as the KLCI continues to trade within the 1577 (200-day SMA) and 1600 psychological levels (with stiffer resistances at 1623-1642). The unwavering spread of Covid-19 infections locally and concerns of full lockdown fears in Selangor (the biggest GDP contributor), as well as slower vaccination pace, will continue to suppress any rebound potential as we are entering the peak of the May reporting season.

Source: Hong Leong Investment Bank Research - 19 May 2021