MARKET REVIEW

Global. Bucking Wall Street’s rout overnight amid fears of aggressive Fed’s rate hikes and the quantitative tightening, most Asian markets ended mildly higher on technical rebound after the PBOC China cut its 1Y loan prime rate (LPR) from 3.8% to 3.7% and the 5Y LPR from 4.65% to 4.6%. Overnight, Wall St extended its losses for the 5th day (Dow: -0.89% to 34715; S&P500: -1.1% to 4482; Nasdaq 100: -1.34% to 14846) as investors lost conviction that an early rally ahead of the crucial FOMC meeting on 25-26 Jan, as investors positioned for monetary policy tightening and assessed outlooks for earnings growth. Meanwhile, Nasdaq 100 futures dropped 0.6% amid a 19% plunge in Netflix prices (extended trading) after the company’s 4Q21 report showed a slowdown in subscriber growth.

Malaysia. After fluctuated within 1525.5-1532.8 band, KLCI eased 2.6 pts to 1527.8 (led by extended consolidation in banking, glove and telco stocks) to record its 4th straight decline. On a separate note, BNM maintained the OPR at 1.75% and considers it to be accommodative to support economic activity. However, market breadth turned positive as 518 gainer beat 403 losers with turnover eased 5% to 3.39bn shares valued at RM2.25bn.

TECHNICAL OUTLOOK: KLCI

Following a 41.8-pt rout in four trading sessions, KLCI’s recent rebound from 1475 low had stunted following a decisive breakdown below 200D MA and support trendline. We expect further wild swings ahead with the next crucial support at 1520. A decisive breakdown will confirm the double top pattern and trigger more selldown towards lower support at 1500 levels. Stiff hurdles are situated at 1540-1550-1570 zones.

MARKET OUTLOOK

Tracking extended routs in Wall St and the KLCI decisive breakdown below 200D MA and support trendline, the benchmark is expected to have a rocky road ahead with key supports at 1500-1511-1520 levels (major resistances 1540-1550-1570). Our mantra of continued market volatility prevails as the positives (eg strong 2022 economic GDP growth of 5.5%, high vaccination rates, elevated FCPO and oil prices, additional liquidity available for domestic GLC funds following the end of the various one-off withdrawal schemes under Covid-19 stimulus packages ) are partly offset by the Covid-19 virus’ mutation and surging global infections, hawkish Fed, slowing China’s economy, potential local headwinds in the form of policy, corporate earnings and political risks.

Source: Hong Leong Investment Bank Research - 21 Jan 2022