MARKET REVIEW Global. The MSCI Asia-Pacific ex-Japan index skidded 1.7% to 191.5 (YTD low) in response to the worries of fresh Omicron’s lockdowns and hawkish shift by the global central banks’ policy clouded the outlook for economic recovery. Ahead of the extended Christmas holidays (Wall St will be closed on 24 Dec), the Dow nose-dived as much as 700 pts to 34665 before paring the losses to 433 pts or 1.23% at 34932 amid heightened fears that the Omicron variant will spur a new wave of infections, sparking restrictions and undercutting the economic rebound. Moreover, the aggressive Fed’s stimulus dial-back and a critical setback to Biden’s USD1.7 trillion economic agenda after disagreement from a conservative Democrat Joe Machin exacerbated the market volatility.

Malaysia. In line with the weaker regional market and lack of follow-through buying from last Friday’s 17-pt rally, KLCI shed 8.11 pts to 1493.9, dampened by selling spree in selected heavyweights such as PMETAL, TENAGA, HLBANK, and KLK. Market breadth were negative for 2 consecutive days, with the G/L ratio plunging to 0.35 (685 losers vs 244 gainers), while turnover fell to 2.47bn shares (-12% vs 2.81bn last Friday) valued at RM1.72bn (-36% vs RM2.72bn previously).

TECHNICAL OUTLOOK: KLCI

Lacklustre buying momentum saw the KLCI resumed its fall by 8.1 pts to 1493.9 yesterday, below the critical 1500 psychological support. In the near term, KLCI may continue to remain choppy with key supports at 1452-1475 levels. We reiterate our view that only a decisive reclaim above mid BB near 1500 will push the index higher towards 1515-1523 zones.

MARKET OUTLOOK

In the short term, Bursa Malaysia will remain in risk-off mode, taking cues from a new wave of lockdowns in Europe, Fed’s hawkish tilt policy as well as persist foreigners’ liquidations (- RM1.17bn in Dec after net inflows of RM3.6bn from Aug-Nov). Nevertheless, KLCI could still experience oversold rebound, driven by potential window dressing activities (registering an average return of 3.6% in 26 of the past 30 years in Dec) and ongoing discussions by ASCM (sources) and regulators to maintain stamp duty rate with reinstatement of higher caps to revive a tepid trading sentiment. Key supports are pegged at 1452-1475 whilst resistances are situated near 1515-1523 levels.

Source: Hong Leong Investment Bank Research - 21 Dec 2021