MARKET REVIEW

Global. Asian bourses continued to struggle as sentiment was dampened by the recent meltdown in cryptocurrencies, taper tantrum talks from the April FOMC minutes, and economic uncertainties over the resurgence of Covid-19 cases in many parts of Asia. The Dow jumped 188 pts to 34084 after a three-day slide, boosted by bargain hunting in mega cap technology stocks (Nasdaq +1.8%) following the smallest weekly jobless claims since the start of a pandemic-driven recession and a retreat in US 10Y treasury yield.

Malaysia. KLCI extended its losses for 2nd day, ending -5.2 pts to 1575.3, a tad below the 200d SMA. Sentiment was bearish as 832 losers overwhelmed 288 gainers amid news that the Government was mulling over a full lockdown (pending a National Security Council meeting at 3pm today) to tackle the Covid-19 pandemic after hitting another fresh record of 6806 daily cases. Local retailers (+RM26m; 39.2% of trading value) joined foreign investors (+RM59m; 17.1% of trading value) as the major net buyers whilst local institutions (- RM85m; 43.7% of trading value) emerged as the net sellers in equities for the 3rd consecutive Session.

TECHNICAL OUTLOOK: KLCI

Although KLCI has staged a decent rebound following the Hammer pattern formation on 6 May, the range bound consolidation mode for the index prevails in the next 4-6 weeks. On the upside, congested resistances are spotted at 1600-1623 levels. Only a successful breakout above these hurdles would spur a fresh run towards 1642-1651-1670 levels. Conversely, if the benchmark fails to reclaim above 200D SMA near 1577 today, this would accentuate a bearish move towards 1564-1556-1545 levels.

MARKET OUTLOOK

We reiterate our short term sideways call for now as the KLCI continues to trade within the 1556 (YTD low) and 1600 psychological levels (with stiffer resistances situated at 1623- 1642). The unwavering spread of Covid-19 infections locally and lingering fears of further MCO tightening nationwide, as well as slow vaccination pace, will continue to suppress any rebound potential as we are entering the peak of the May reporting season. Meanwhile, external headwinds such as the risk of a significant pick-up in inflation due to global economic revival, Covid-19 flare-ups in some parts of the world coupled with persistent fears that the US will start to roll back stimulus earlier-than-expected are likely to trigger wild swings in global markets in the short to medium term.

Source: Hong Leong Investment Bank Research - 21 May 2021