HLBank Research Highlights

Traders Brief - KLCI Will Continue to Stay Choppy

Publish date: Wed, 22 Dec 2021, 09:38 AM
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This blog publishes research reports from Hong Leong Investment Bank


Global. Asian shares bounced back yesterday on bargain hunting activities following Monday’s rout amid growing signs of policy easing by Beijing to prevent a hard landing of the debt-rattled property sector. However, heightened concerns surrounding the highly transmissible Omicron strain capped overall gains. Ahead of the extended Christmas holidays (Wall St will be closed on 24 Dec), the Dow rallied 1.6% or 560 pts to 35493, as investors piled into financials, energy and tech stocks following the recent Omicron-fuelled slump. Sentiment was boosted by Biden’s comments that there will not be a March 2020- style lockdown despite recent surging Omicron cases while also outlining multiple measures to fight with the pandemic. Investors also were encouraged by news that the Senate will vote on Biden's Build Back Better economic plan in Jan despite Democratic Sen. Joe Manchin's opposition.

Malaysia. Led by selling spree in selected heavyweights such as TOPGLOV, HARTA, PMETAL, and PPB, KLCI eased 1.3 pts at 1492.5 as investors weighed on the impact by one of its worst flooding in years in Malaysia. Market breadth was negative for 3 consecutive days, with the G/L ratio improved to 0.79 (355 gainers vs 449 losers ) from 0.35 on Monday, while total turnover was 2.45bn shares valued at RM1.66bn.


In the wake of continuous selling pressures from foreign investors and the absence of strong catalysts, we expect KLCI to trap in an extended consolidation with key supports at 1452-1475 levels. We reiterate our view that only a decisive reclaim above mid BB near 1500 will push the index higher towards 1515-1523 zones.


In the short term, Bursa Malaysia will remain in risk-off mode, taking cues from a new wave of lockdowns in Europe, Fed’s hawkish tilt policy, persist foreigners’ liquidations (- RM1.29bn in Dec after net inflows of RM3.6bn from Aug-Nov) as well as assessing the potential impact on sector/corporates after Malaysia experienced widespread flooding in many states in Peninsular Malaysia. Nevertheless, KLCI could still experience oversold rebound, driven by potential window dressing activities (registering an average return of 3.6% in 26 of the past 30 years in Dec). Key supports are pegged at 1452-1475 whilst resistances are situated near 1515-1523 levels.


Source: Hong Leong Investment Bank Research - 22 Dec 2021

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