MARKET REVIEW

Global. Asian bourses inched up in tepid mode (markets in Indonesia, Singapore, Malaysia and Thailand were closed for holidays) in anticipation that the Fed would be able to quell inflation fears and engineer a "soft landing" without throwing the country's economic recovery off track. Despite rising inflation and tapering bond buying jitters as economic reopening broadens, the Dow gained 10 pts to 34323 in a volatile trade as Fed officials continued to tamp down concerns about runaway inflation and kept bond yields in check.

Malaysia. Ahead of the Wesak Day holiday, KLCI extended its relief rally (+6 pts to 1577.8) on 25 May as investors welcomed a tightened MCO 3.0 and not a full national lockdown. Market breadth stayed positive with 582 winners against 464 losers, with a total of 6.3bn shares transacted worth RM3.8bn. Local retailers (+RM45m; 36.4% of trading value; 5D: +RM158m) and foreign investors (+RM20m; 20.9% of trading value; 5D: +RM84m) turned net buyers whilst local institutions (-RM65m; 42.7% of trading value, 5D: -RM242m) emerged as the major net sellers in equities.

TECHNICAL OUTLOOK: KLCI

After sliding 94 pts from YTD high of 1646 (14 Jan) to YTD low at 1552 (21 may), KLCI has rebounded 26 pts to 1577.8 on 25 May, a tad above its 200-day SMA of 1576. Further strong gains from here would spur the index towards congested resistances at 1587 -1600- 1615 levels. Key supports are 1552-1560. A confirm breakdown below YTD low of 1552 will accentuate a bearish move towards 1545-1534 levels. 

MARKET OUTLOOK

As technical indicators are on the mend, KLCI could extend further recovery from 1552 (YTD low) as a nationwide MCO 3.0 total lockdown was not implemented and the government pledged to expedite the Covid-19 immunisation program. Nevertheless, sideways consolidation mode may prevail amid the ongoing Jan-March quarterly results season, the unwavering spread of Covid-19 infections locally and fears of increased risk of earnings disappointment and weaker 2Q GDP (depending on the duration of current tightened MCO 3.0). Stiff resistances are pegged at 1589-1600-1615 whilst supports are situated at 1552-1560. On stock selection, we like LAGENDA (HLIB Research-BUY-TP RM2.01) for its exposure to the underserved affordable housing segment, stable clientele base (public sector workers with government financing access), low land cost, high booking conversion rate and superior margins. After plunging from the recent high of RM1.69 (6 Apr) to a low of  RM1.15 (21 May), the stock staged a strong downtrend line breakout and closed above multiple key SMAs to finish at RM1.38 on 25 May. On the back of its strong 1Q21 results and bottoming up technical indicators, we think that the uptrend may continue in the short term towards RM1.42-1.47-1.55 levels. Supports are pegged at RM1.30-1.22-1.15 zones.

Source: Hong Leong Investment Bank Research - 27 May 2021