MARKET REVIEW

Global. Asian markets ended mostly higher, boosted by sign of healing US labour market as the weekly jobless claims plunged to a new pandemic low, and Biden’s proposal of a USD6 trillion federal spending for 2022, mainly on infrastructure, education and combating climate change stimulus measures. On the back of Biden’s USD6 trillion budget plans, the Dow jumped as much as 167 pts before paring the gains to 65 pts to 34529 (+322 pts or 0.9% WoW), as sentiment was dampened by the rise in April PCE index to near 13Y high at 3.6% and the Memorial Day holiday on 31 May.

Malaysia. KLCI slipped as much as 13.1 pts to a low of 1580.8 in light of further restrictions in economic activities as well as uncertainties over the duration of the tightened MCO 3.0 period. However, the benchmark recouped all the losses to end 0.5-pt higher at 1594.4, helped by growing global economic recovery optimism (IMF upgraded 2021 and 2022 global GDP forecasts to 6% and 4.4%, respectively) and buoyant April’s exports for Malaysia. Foreign institutions (+RM113m; 5D: +RM236m) and retailers (+RM15m; 5D: +RM132m) were the major net buyers whilst local institutions (-RM128m; 5D: -RM368m) remained as top net sellers for the 8th consecutive day.

TECHNICAL OUTLOOK: KLCI

After sliding 94 pts from YTD high of 1646 (14 Jan) to YTD low at 1552 (21 May), KLCI has rebounded 42 pts to finish at 1594 (+32 pts or 2% WoW) last Friday, staging a strong breakout above multiple key SMAs but still unable to break above the 1600 barrier (LT downtrend line from 1696). Only a successful breakout from here would spur the index towards stiff resistances at 1600-1615-1623 levels. Conversely, following the total full lockdown (FMCO) announcement last Friday, selling pressures are likely to emerge this week, with key supports revised lower towards 1576 (200D SMA) and 1552 (YTD low) levels. A breakdown below 1552 will send the index lower towards 1540-1530 levels.

MARKET OUTLOOK

In the wake of the total lockdown’s 1st phase from 1-14 June, KLCI may encounter an extended consolidation amid escalating risks of earnings disappointment and weaker 2Q GDP (negative for recovery play stocks). Nevertheless, defensive sectors like utilities, telco, glove makers and plantations may attract buying interests until Covid-19 cases decline or there is a significant jump in vaccination rate. Key resistances are pegged at 1600-1606 levels whilst supports are near 1576 (200D SMA), 1552 (YTD low) and 1540 zones

Source: Hong Leong Investment Bank Research - 31 May 2021