BELOW are excerpts of viewpoints from two selected research houses on what investors can expect in the day ahead:
Inter-Pacific Research
Key index stocks continue to make headway yesterday, passing the 1,630 level as window dressing activities persisted to cast aside the country’s rating cut and unresolved political uncertainties.
Its gains were led by glove-related stocks ahead of Top Glove Corp Bhd’s reporting of its quarterly results as well as the unabated rise in global COVID-19 cases that should sustain glove demand.
Genting Bhd was also making headway following the end of the conditional movement control order (CMCO 2.0) ruling for most states.
Traded volumes, however, slipped with market breadth also on the negative side.
The key index remains stretched, in our view, more than reflected the potential corporate earnings recovery in 2021 with the FBM KLCI’s price-to-earnings ratio (PER) already nearing 17.0x, exceeding its historical forward average range of 14x-16x.
At the same time, much of the market’s euphoria has been driven by the COVID-19 vaccine development that we also think have been overdone given that the vaccine distribution difficulties have not been resolved.
As such, we maintain our view that a pullback is already due following November’s strong gains.
However, as there are still scant indications of an impending consolidation, the toppish conditions are likely to sustain, albeit we think any gains could be more modest.
On the upside, the hurdles are at the 1,636-1,650 levels, while the supports are at 1,620 and the 1,600 psychological level respectively.
Hong Leong Investment Bank Research
Following recent 180-point or 12.4% rally from 1,452 low to an 18-month high at 1,631.7 yesterday, the FBM KLCI is ripe for a mild pullback (with key supports upgraded to 1,600-1,618).
This is due to the grossly overbought technical readings, concerns over the uneven global economic recovery despite vaccines’ optimism, the repercussions on our economy and corporate earnings after the CMCO 2.0, and Fitch’s downgrade on Malaysia’s sovereign credit rating.
However, we opine that the traditional December window dressing (average +3.8% return from 1990-2019 with a 87% successful hit rate) and continued migration from pandemic-themed to economic recovery beneficiaries may provide the much-needed impetus to boost the benchmark higher towards 1,638-1,668 zones before profit steps in. – Dec 9, 2020
