MARKET REVIEW

Global. Most Asian markets rose as Fed officials insisted that they expect inflation to be transitory and the central bank will not hike interest rate for a while. Sentiment was also boosted by a series of recent soft economic data in China, which helped to assuage policy tightening fears. Led by persistent rotation into cyclical and value plays, the Dow gained 141 pts to 34464, underscored by data showing jobless claims dropped to a fresh pandemic low while orders for business equipment climbed more than forecast.

Malaysia. KLCI staged a last-minute bargain hunting on selected heavyweights amid news of MSCI May 2021 index rebalancing activities. Sentiment was also helped by growing global economic recovery optimism and expectations of more aggressive vaccination rollouts in Malaysia. Foreign institutions (net buy RM100m; 47.8% of trading value, 5D: +RM181m) superseded local institutions (net sold RM138m; 30.9% of trading value, 5D: - RM324m) and retailers (net buy RM38m; 21.3% of trading value, 5D: +RM143m) as the biggest contributor to the trading value in equities yesterday.

TECHNICAL OUTLOOK: KLCI

After sliding 94 pts from YTD high of 1646 (14 Jan) to YTD low at 1552 (21 may), KLCI has rebounded 54 pts to end at 1594 on 27 May, staging a strong breakout above the sliding resistance from recent high of 1623 and above 200D SMA at 1576. Further strong gains from here would spur the index towards stiff resistances at 1600-1615-1623 levels. Key supports are now revised to 1587-1576-1564 levels.

MARKET OUTLOOK

We may see mild profit taking activities today (key resistances 1600 -1615 levels) following recent 54-pt relief rally from 1552 (YTD low), considering 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). Nevertheless, any pullback is likely to be cushioned near 1552-1576 zones in anticipation of growing global economic recovery optimism and more aggressive vaccination rollouts in Malaysia.

On stock selection, we like IJM (HLIB Research-BUY-TP RM2.11) for its upbeat 4Q21 results and strong earnings visibility to ride on this period of uncertainty, underpinned by (i) outstanding orderbook of RM4.0bn (translating into 2.1x cover on FY21 construction revenue); (ii) unbilled sales of ~RM1.4bn, translating into a decent cover of 1.0x on FY21  property revenue and (iii) stable earnings from industry, infrastructure and plantation divisions. After plunging 17% from the 52-week high of RM2.06 to RM1.71 yesterday, the stock is grossly oversold with strong supports near RM1.60-1.65 levels. Potential upside towards RM1.83-1.95 if immediate resistance at RM1.77 (10D SMA) is taken out successfully.

Source: Hong Leong Investment Bank Research - 28 May 2021