MARKET REVIEW

Global. On 31 Dec 2021, Asian markets ended mixed in lacklustre trades (Australia, Hong Kong and Singapore ended early whilst Japan, South Korea, Taiwan and Indonesia were closed) as investors weighed on the positive China official manufacturing PMI against the implications of the highly contagious Omicron variant, central banks’ withdrawal of monetary stimulus, and elevated inflation. Wall St ended lower on the final day of 2021 (S&P 500: -0.26% at 4766, Dow: -0.16% to 36338; Nasdaq: -0.66% to 16320) on profit taking, capping off a record-setting 2021 that came despite the persistent headwinds of Covid-19. YoY, the Dow, S&P 500 and Nasdaq scored their 2nd year of recovery from a global pandemic, rallying 18.7%, 26.9% and 21.4%, respectively.

Malaysia. Bucking regional markets, KLCI surged 23.9 pts to 1567.5 led by late buying interests on selected heavyweights, namely IHH, TOPGLOV, AXIAT, MAXIS, DIGI and PCHEM, boosted by window-dressing action and the reinstatement of stamp duties cap at RM1000 (albeit at higher rates from RM200 removal). Despite the rally, KLCI ended -3.7% YoY, the 2nd poorest performer in Asia after Hong Kong (-14.1% YoY to 23398). Market breadth turned positive as 479 gainers edged 413 losers, while total turnover increased 10.5% to 2.52bn shares valued at RM1.86bn.

TECHNICAL OUTLOOK: KLCI

After plunging 8.55% or 138 pts to a low at 1475 from 4Q21 high of 1613, KLCI staged an outstanding relief rally to end 23.9 pts higher at 1567.3 on 31 Dec, successfully refilling the post Budget 2022 gap and crossing convincingly above the 200D SMA of 1554. Nevertheless, we expect profit taking to emerge this week to neutralise the overbought momentum after surging 3.4% WoW and 3.5% MoM, with key supports at 1528-1545. After a brief consolidation, the benchmark may re-challenge 1580-1600-1613 barriers.

MARKET OUTLOOK

The recovery scenario will continue to unfold into 2022, as a new growth cycle emerges following Malaysia’s high vaccination rates. However, further upside may be capped as the anticipated recovery will be contingent upon the Covid-19 virus’ future mutation and the ensuing response, fluid domestic politics and assessing the impact on sector/corporates after widespread flooding in many states in Peninsular Malaysia. Key supports are pegged at 1528-1545 whilst stiff resistances are situated at 1580-1600-1613 levels.

VIRTUAL PORTFOLIO POSITION-FIG1

Following the sharp rally, we had decided to square off our December’s technical trackers on 31 Dec i.e. BIMB (3.4% gain), JHM (1.2% gain), SIMEPLT (0% gain), GENM (2.5% gain) and BEAUTO (3.9% gain).

Source: Hong Leong Investment Bank Research - 3 Jan 2022