MARKET REVIEW

Global. Asian markets struggled as sentiment was dampened by the recent meltdown in crypto-currencies (amid stricter regulatory announcements by the US and China), taper tantrum talks from the April FOMC minutes and economic uncertainties over the resurgence of Covid-19 cases in many parts of Asia. Taking cue of a robust May flash US manufacturing PMI to an all-time high of 61.5, the Dow rallied as much as 334 pts to 34415. However, the gains were reduced to +123 pts at 34207 in the wake of the turbulence from crypto-currencies and continuous rotation from tech-related mega-cap shares to economic recovery proxies, with the vaccine rollouts and reopening of the economy.

Malaysia. KLCI slid as much as 23.3 pts to YTD low of 1552.1 before ending -13.1 pts at 1562.2, as the country grappled with a record number of Covid-19 deaths and infections, as well as fears that the NSC will support a country-wide full lockdown. Market breadth was bearish with losers thumped gainers by 881 to 330. Local retailers (-RM16m; 40.5% of trading value; +RM67m WoW) joined local institutions (-RM29m; 42.4% of trading value; - RM100m WoW) as the major net sellers whilst foreign investors turned net buyers for the 2nd consecutive day (+RM45m; 17.1% of trading value; +RM33m WoW).

TECHNICAL OUTLOOK: KLCI

KLCI has fallen for the 4th straight week following a -20.3-pt WoW last week to 1562.2 (trading at 14.8 pts below the key 200D SMA of 1577). Unless swiftly retaking above 1577, the benchmark may face further sell down if YTD low of 1552 support is broken again, accentuating a bearish move towards 1545-1533 levels amid the lack of fresh impetus. On the upside, congested hurdles are pegged at 1577-1590-1600 levels. 

MARKET OUTLOOK

In this holiday-shortened week (Wesak day holiday on 26 May), KLCI may stage a technical rebound as a nationwide MCO 3.0 total lockdown was not implemented and the government pledges to expedite the National Covid-19 Immunisation Programme. However, any relief rally is likely to be suppressed with key resistances at 1577 (200D SMA), 1590 and 1600 levels, as investors digest the tightened MCO 3.0 and elevated Covid-19 infections locally (7D MA at 5997 cases) coupled with the peak of May reporting season. Meanwhile, a breakdown below YTD low of 1552 would accentuate a bearish move towards 1545-1533 levels.

Source: Hong Leong Investment Bank Research - 24 May 2021