MARKET REVIEW

Global. Mirroring Wall Street’s rout overnight, Asian markets fell last Friday amid rising fears of aggressive Fed’s rate hikes and the possible reduction of its USD8.8tr balance sheet, as well as potential Russian-Ukraine conflict. Last Friday, Wall St extended its losses (Dow: -1.36% to 34243/-7.3% from all-time high 36952; S&P 500: -2% to 4392/- 8.8% from all-time high 4818; Nasdaq 100: -2.8% to 14430/ -13.9% from all-time high 16767), as sentiment was dampened by a 23% plunge in Netflix share price after the company's subscriber outlook missed estimates, expectations of more hawkish Fed during its meeting on 25-26 Jan and a full swing in earnings season including 30% of the Dow companies reporting.

Malaysia. Despite extended fall from Wall St, KLCI managed to end flat (-0.69 pt to 1527.1) as technical indicators are getting grossly oversold after tumbling from recent peak of 1570. Market breadth was negative as 575 losers outnumbered 334 gainers with turnover slipped 22% to 2.64bn shares valued at RM1.98bn.

TECHNICAL OUTLOOK: KLCI

Following a 42.4-pt rout in five trading sessions, KLCI’s recent rebound from 1475 low has stunted after a decisive breakdown below 200D MA and support trendline. We expect further wild swings ahead with the next crucial neckline support at 1515. A decisive breakdown will confirm the double top pattern and trigger more selldown towards 1500 psychological levels. Stiff hurdles are situated at 1540-1550-1570 zones.

MARKET OUTLOOK

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 Covid-19 withdrawal schemes) are partly offset by extended routs from Wall St ahead of the crucial FOMC meeting on 25-26 Jan, surging Covid-19 cases worldwide, heightened geopolitical tensions between US-Russia over Ukraine invasion, slowing China’s economy, potential local headwinds in the form of policy, corporate earnings and political risks (upcoming Johor snap polls and potential GE15 in 2022 before expiry in mid-2023).

Source: Hong Leong Investment Bank Research - 24 Jan 2022