MARKET REVIEW

Global. Ahead of the key US and China trade and inflation data this week, Asian markets ended lower as investors continued to assess the Omicron ‑ related uncertainty (i.e. severity, infectiousness, and resistance of the strain) and the more aggressive tightening cycle from the Fed. After plummeting 5.3% from an all-time high of 35565 to 34633 intraday low, the Dow finished 647 pts higher to 35227 after Dr Fauci said that the new Omicron strain does not look like there’s a great degree of severity to it based on the latest findings, easing investor fears about potential economic fallout.

Malaysia. Worries over the economic impact from the Omicron strain and rising inflationary pressures coupled with recent selling spree from foreign institutions (its 9th day of net outflow out of ten totalling –RM906m), KLCI tumbled 18.3 pts to end at 1483.5 (a fresh 13M low). Sentiment was bearish as 790 losers thumped 242 gainers (its 9th negative breadth day out of the last ten), while turnover stood at 3.55bn shares valued at RM2.57bn.

TECHNICAL OUTLOOK: KLCI

Following the bearish Marubozu pattern after a 18.3-pt slide yesterday, KLCI near term outlook has turned increasingly negative. We may see the index drifting lower towards 1452 (a 2-year low) before staging a meaningful rebound due to its steeply oversold position after diving 130 pts or 8% from recent high at 1613 pts. Nevertheless, any rebound is likely to be capped at formidable 1500-1516-1540 zones.

MARKET OUTLOOK

Following the bearish Marubozu pattern after sliding 18.3 pts yesterday, KLCI near term outlook has turned increasingly negative. Given the renewed selling spree from foreign institutions, Fed’s faster wind-down to its bond-buying program to tackle surging inflation (widely seen as precursor to earlier interest rate hikes) and heightened uncertainties about the contagious Omicron variant, KLCI may continue to trend lower towards 1452 (a 2-year low) before staging a meaningful rebound at 1500-1516-1540 levels, in anticipation of Dec window-dressing activities. Statistically, the odds are favourable that the barometer index had logged positive monthly performance for December, with an average monthly return of +2.2% since 2011.

Source: Hong Leong Investment Bank Research - 7 Dec 2021