BELOW are excerpts of viewpoints from two selected research houses on what investors can expect in the day ahead:
Inter-Pacific Research
Malaysian equities posted strong gains yesterday with banking stocks leading the way on upgraded recommendations by brokerages.
Many other index heavyweights followed suit in what is seen as early year-end window dressing activities, helped by the optimism over the COVID-19 vaccine development as well as the realignment of FBM KLCI component stocks for the upcoming year.
The positivity also spread to the broader market with gainers overwhelming losers more than a 2-to-1 ratio with market interest tipping up as well.
After a stronger-than-expected jump, we think that profit-taking is likely to set-in ahead of the weekend. As it is, we see the recent market jump as overdone with valuations of 19.0 times and 16.7 times for 2020 and 2021 already exceeding its historical averages.
Moreover, we also think that the gains have mostly reflected the potential earnings recovery for next year, thereby leaving less room for further near term gains.
Any pullback will also be deemed healthy for some of the gains to be digested and a base to be built-up before potentially further window dressing activities later in the month.
For now, we see the key index retreating to the around 1,600-1,610 levels, while the resistances are at 1,636 and 1,650 respectively.
Hong Leong Investment Bank Research
Following a powerful technical breakout above the much-awaited 1,618 neckline resistance yesterday, a further advance towards 1,639 and 1,668 zones is underway before profit taking pause, taking cue from the vaccines optimism, traditional December window dressing (average +3.8% return from 1990-2019 with a 87% successful hit rates) and the continued shift from pandemic-themed to recovery-focused beneficiaries.
Meanwhile, profit taking pullback supports are situated at 1,618 to 1,600-1,587 levels – Dec 4, 2020.
