WELCOME to the first day of trading post the much awaited Budget 2021 which has been touted as “mother of all budgets”.
The number one question in the mind of investors whether the retail, institutional or foreign fraternity will probably be how Bursa Malaysia will perform – or react – to the various economic and financial outlook laid out by Finance Minister Tengku Datuk Seri Zafrul Tengku Aziz at the Dewan Rakyat last Friday (Nov 6).
Hong Leong Investment Bank (HLIB) Research’s head of retail research Ng Jun Sheng expects the Joe Biden presidency (viewed as a moderate and less confrontational leader) and a stimulative Budget 2021 to likely keep the local bourse in a jubilant mode.
However, he cautioned about concerns on the economic impact from the extension to the conditional movement control order (CMCO) exercise (to Dec 6 with the exception of Perlis, Pahang and Kelantan) and the ongoing November results season which may restrict further rally.
“Sector wise, we reiterate our ‘overweight’ rating on the glove sector given its strong earnings prospects by being a key beneficiary of the robust global demand owing to COVID-19,” he wrote in a research note.
“Moreover, in the absence of a widely-speculated windfall tax on the sector and with the removal of this major overhang, the sector is riped for a further rebound in the short term.”
Ng pegs the FBM KLCI weekly support levels at 1,500-1,489-1,474 with resistances situated near the 1,535-1,541-1,555 levels,
Although the equity market has mounted a decent recovery of late by riding on the positivity in global equities despite the unabated COVID-19 cases worldwide, Inter-Pacific Research foresees some renewed cautiousness ahead with the CMCO being extended by another month.
“While the recent gains were in store after their retreat, we think the guarded market conditions could make a return,” opined the research house, noting that the country’s economic conditions could be hampered again by the prolonged semi-lockdown conditions.
“The prognosis of slower economic conditions could also translate to slower corporate earnings recovery in 4Q CY2020,” added the research house.
Inter-Pacific Research also observed that lower liners and broader market shares have mounted a much-stronger recovery even as overall market interest has yet to return to the previous levels.
“We think the rotational and thematic plays on these stocks would sustain, helping to keep these shares elevated for longer,” projected the research house.
“The combination of a low interest rate environment and higher risk appetite are the key considerations to sustain the interest on these stock for longer, in our view.” – Nov 9, 2020
