BELOW are excerpts of viewpoints from two selected research houses on what investors can expect in the day ahead:
Inter-Pacific Research
Expectedly, Malaysian equities lost ground last Friday after a strong push a day earlier that left the key index at its highest level for the year. Market conditions turned mixed as well, with most stocks ending in the red amid profit taking activities after a more-than-decent November month that saw the key index chalking up gains of some 10%.
Despite the pullback, traded volumes continue to pick up on the sustained following from domestic institutions and retail players.
The start of the week, however, looks set to be volatile with the index heavyweights to be pressured following Fitch Ratings downgrade of the country’s sovereign rating to BBB+, from A-, citing the weaker fiscal position.
Some knee-jerk reaction to the ratings cut is expected as foreign selling could worsen. In addition, there is still some measure of domestic political uncertainties that could keep investor optimism in check for now and that could also prolong the key index’s near-term weakness.
As such, we think the FBM KLCI is likely to see its downside bias prolonging with the 1,620-support unlikely to hold. Below 1,620, the other supports at 1,615 and 1,605 points respectively.
The hurdles, meanwhile, are at 1,628 – the recent high, and at 1,636 respectively.
Hong Leong Investment Bank Research
Following a powerful technical breakout above the much-awaited 1,618 neckline resistance last week, the FBM KLCI is ripe for further profit taking consolidation.
This is given the overbought momentum (+170 pts from the Nov 2’s low of 1,452) and concerns over the huge amount of global economic uncertainties created by COVID-19 despite vaccines’ optimism, expectations of weaker 4Q 2020 economy in Malaysia (post conditional movement control order 2.0), coupled with possible knee-jerk sell-down after Fitch downgraded Malaysia’s sovereign credit rating to ‘BBB+’ from ‘A-’ last Friday.
Nevertheless, we believe the traditional December window dressing (average +3.8% return from 1990-2019 with a 87% successful hit rates) and continued shift from pandemic-themed to recovery-focused beneficiaries may cushion downside near 1,592 (uptrend line support from 1,452) and 1,562 (Nov 30’s low). – Dec 7, 2020
