MARKET REVIEW

Global. Asian markets ended mixed amid wild swings in crypto-currencies and material prices after China stepped up intervention to prevent speculative and financial risks. Sentiment was also dampened by resurgence in Covid-19 cases in some parts of the region and persistent fears of inflation pressures in the U.S.

The Dow jumped 0.5%) to 34394 whilst the Nasdaq surged 1.4% to 13661 as tech continued its rebound (bond yields eased after Fed officials sought to soothe concerns about inflation) and reopening stocks rallied amid easing pandemic restrictions as Covid-19 cases in the U.S. hit their lowest since the pandemic began following the aggressive vaccine rollouts.

Malaysia. KLCI jumped as much as 14.8 pts in early trades before ending +9.7 pts to 1571.8 (breaking a 3-day losing streak), as a nationwide MCO 3.0 total lockdown was not imposed and the government pledged to expedite the National Covid-19 Immunisation Programme. Market breadth was bullish with 902 winners against 283 losers, with a total of 6.8bn shares transacted valued at RM3.5bn. Local retailers (+RM50m; 37.6% of trading value; 5D: +RM114m) turned net buyers whilst local institutions (-RM6m; 44.4% of trading value, 5D: -RM177m) joined foreign investors (-RM44m; 18% of trading value; 5D: +RM63m) as the major net sellers.

TECHNICAL OUTLOOK: KLCI

After plunging 46.3 pts in four weeks, KLCI finally staged a 9.7-pt relief rebound yesterday at 1571.8. With the index still trading below its 200-day SMA near 1576, the trends for the short and medium terms are still sideways with a negative bias. A confirm breakdown below YTD low of 1552 will accentuate a bearish move towards 1545-1533 levels. On the upside, a successful breakout above 1576 would spur the benchmark towards congested barriers near 1589-1600 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 pledged to expedite the National Covid-19 Immunisation Programme. Nevertheless, with the index still trading below its 200-day SMA near 1577, the trends for the short and medium terms are still consolidating sideways with lower supports at 1552 (YTD low) and 1545 (61.8% FR). On the upside, a successful breakout above 1577 would spur the benchmark towards stiff hurdles near 1589-1600 levels, as investors digest the stricter MCO 3.0 and elevated Covid-19 infections locally (7D MA at 6292 cases).

On stock selection, after sliding 54% from 52-week high of RM3.08, SCIB (RM1.40-Notrated) looks attractive as technical indicators are on the mend after closing above 200D SMA (now at RM1.37) strongly in high volume (5.87m vs 20D average 5.47m shares). The construction outfit (sitting with RM1.5bn order book) is eyeing to bid for bigger infrastructure projects by (i) diversifying its geographical presence; (ii) strengthening in-house construction capabilities; and (iii) exploring supply chain partnerships or technology enabler like 3D printing that can improve efficiency and productivity. A confirmed breakout above RM1.48 may spur prices higher towards RM1.58-1.66 zones whilst key supports are pegged at RM1.23-1.30. Meanwhile, SCIB announced on 3 May it plans to raise up to RM227.8m private placement based on an indicative issue price of RM1.548/share.

Source: Hong Leong Investment Bank Research - 25 May 2021