BELOW are excerpts of viewpoints from two selected research houses on what investors can expect in the day ahead:
Inter-Pacific Research
Despite the country’s rating cut, Malaysian equities remained largely resilient yesterday, helped by bouts of what is seen as early window dressing activities.
As it is, most market players were unmoved by Fitch Rating’s move to trim the country’s sovereign rating even as there was some hesitation early on the session.
As the heavyweights dithered with local and foreign institutions the net sellers, retail players remained firm followers, continuing their trades in the lower liners and broader market shares that lifted total traded volumes to its highest level in nearly a month.
Although the effects of the ratings cut were significantly milder-than-expected, overall market conditions remain indifferent as they are toppish after the strong gains in November.
This has left valuations tethering on the expensive side with most of the expected earnings recovery in 2021 already reflected, in our view.
At the same time, there are also fewer near-term catalysts with market players awaiting for more developments on the COVID-19 vaccine front to gauge if corporate earnings recovery could improve further.
Under the prevailing environment, we think that the key index could stay range-bound for longer, lingering around the 1,620-1,630 levels amid the rotational buying among the index heavyweights.
The other support and resistance levels are at 1,615 and 1,636 points respectively.
Hong Leong Investment Bank Research
Following recent surge from the 1,452 low, the FBM KLCI is ripe for a mild pullback (with key supports at 1,590-1,600).
This is due to the grossly overbought technical readings, concerns over the uneven global economic recovery despite vaccines’ optimism, the repercussions on economy and corporate earnings after the CMCO 2.0, and Fitch’s downgrade on Malaysia’s sovereign credit rating.
However, we believe the traditional December window dressing (average +3.8% return from 1990-2019 with a 87% successful hit rate) and continued shift from pandemic-themed to economic recovery beneficiaries may provide the much-needed impetus to lift the benchmark higher towards the 1,639-1,668 zones. – Dec 8, 2020
