MARKET REVIEW

Global. Ahead of the key US Nov CPI report, the MSCI Asia Ex-Japan index fell 4.8 pts to 632.8 as investors weighed the ripple effects from Evergrande Group's default and the economic threat of Omicron strain restrictions against optimism about the efficacy of vaccines. Wall St ended higher last Friday (Dow: +216 pts to 35971; S&P500: +44 pts at 4712; Nasdaq 100: +182 pts at 16332) as the multi-decade fast pace of Nov CPI (+6.8% YoY and +0.8% MoM) were largely priced in, ahead of the 14-15 Dec FOMC meeting. The sentiment was also cheered by upbeat results from Oracle and Broadcom, dismissing the highly contagious Omicron fears.

Malaysia. In sync with weaker regional markets, persistent foreign institutions’ liquidations (-RM935m in the last ten days), and a selloff in glove makers following a bearish Top Glove 1Q22 results, KLCI lost 12.9 pts to 1488.9. Market breadth turned negative again after three days of positive gains as 594 losers thumped 278 gainers, while turnover fell 0.13bn to 2.60bn shares valued at RM1.74bn (2nd lowest in YTD).

TECHNICAL OUTLOOK: KLCI

Despite its steeply oversold position after sliding 124 pts from 1613 (20 Oct high), the bears are likely to stay for a while unless the index can swiftly reclaim above immediate overhead resistances at 1500-1520 zones. Upon a successful breakout, the index may advance to 1540-1545-1560 zones, ahead of the seasonally stronger Dec window-dressing month. On the flip side, a decisive break-down below 13M low at 1483 (6 Dec) may see the index retreating lower towards 1452 (a 2-year low).

MARKET OUTLOOK

KLCI tumbled 12.8 pts WoW to end at 1488.9 last Friday, a losing streak of eight successive weeks that culminated with a cumulative slide of 110 pts amid persistent foreigners’ liquidations, rising domestic debt level and policy uncertainty, Fed’s hawkish tilt (will exert pressure on Ringgit and further affect the flows dynamic in the near term), as well as the “market unfriendly” taxes in Budget 2022. Nevertheless, the KLCI will probably attempt to regain its footing in the coming days amid grossly oversold indicators and the formation of a potential double-bottom reversal pattern as the key bellwether may find a floor around the 1452-1483 region in anticipation of a possible Dec window-dressing activities (stiff resistances: 1500-1520).

Source: Hong Leong Investment Bank Research - 13 Dec 2021