MARKET REVIEW

Global. Tracking overnight rout from Wall St, Asian bourses were in a sea of red last Friday amid a spike in regional bond yields rose after US Treasury yields jumped, as prospects for higher inflation and economic growth increased, triggering fears that the ultra-low interest rates will come to an end soon. Despite positive expectations that the US CDC will approve the usage of J&J one-shot Covid-19 vaccine and reassuring remarks by Fed that soaring US bond yields were driven by economic optimism rather than inflation fears, the Dow recorded a back-to-back decline, plunging 470 pts to 30932 (-562 pts WoW and +950 pts MoM) as the US 10Y yield surged to a fresh 52-week high of 1.61 % before ending at 1.41% last Friday.

Malaysia. Tracking Wall St and regional markets’ slump, KLCI slid as much as 187 pts to 1563.6 before paring the losses to 3.8 pts to 1577.8 in anticipation of the start of our national vaccination program. Market breadth was bearish as losers 931 outnumbered gainers 317, with a total of 9.8bn shares traded worth RM7bn. Last Friday, the local institutional (-RM133m) joined foreign investors (-RM80m) to offload equities while local retailers (+RM213m) were the net buyers.

TECHNICAL OUTLOOK: KLCI

After trading within 1557 (24 Feb low) and 1587 bands, KLCI eased 7.7 pts WoW (+11 pts in Feb) to end at 1577.8 last Friday, forming a small hammer candlestick. Unless staging a strong recovery above 1595 (downtrend line from 1696 peak) and 1618 zones, the benchmark is likely to trap in the downtrend channel for now, as the back-to-back slide on Dow could dampen further sentiment on our market to revisit 1557 and 1552 (200D SMA) levels. A decisive breakdown below these levels will trigger further slump towards 1530 (lower downtrend channel) and 1500 levels eventually. On the flip side, a successful breakout above the congested 1595-1618 resistances will encourage more upside potential to 1646 and 1661 (200W SMA) zones.

MARKET OUTLOOK

The back-to-back selloff on Dow last Friday triggered by higher inflation and lofty valuations concerns should spillover to our local bourse today, with key supports hovering at 1563- 1557-1552 levels. Nevertheless, severe downside risk may be cushioned by an oversold slow stochastic reading, Fed’s dovish outlook, a huge US stimulus package, falling Covid- 19 infections globally, and the planned vaccination program in Malaysia.

Source: Hong Leong Investment Bank Research - 1 Mar 2021