MARKET REVIEW

Global. Ahead of the key USA inflation data Thursday, Asian markets ended mostly higher due to bargain hunting activities after recent slump, despite lingering concerns such as high inflation rate, geopolitical tensions in Ukraine and expectations of more aggressive tightening measures by world central banks. Overnight, the Dow rallied 371 pts to 35462 as investors digested another batch of strong corporate earnings from Harley-Davidson, American Express, Amgen and JP Morgan. In spite of soaring US 10Y Treasury yields (+0.05% to 1.95%) ahead of an inflation report later this week, the Nasdaq soared 179 pts to 14195 as investors rotated back into high growth tech stocks after recent selloff.

Malaysia. Shrugging off surging local Covid-19 cases amid the onslaught of Omicron variant, KLCI ended -0.56-pt at 1530, as pullback from glove stocks was offset by bargain hunting on tourism-related heavyweights such as GENM and GENTING amid National Recovery Council’s (NRC) proposal to fully reopen Malaysia’s international borders as early as March. Market breadth turned negative with losers outpacing gainers by 468 to 451 whilst total turnover stood at 2.85bn shares valued at RM2.17bn.

TECHNICAL OUTLOOK: KLCI

Following the slide from YTD high of 1570 to a low at 1503, KLCI has pared some losses to end at 1530 yesterday, above the key 1515 (neckline support) and 1520 (50D MA) levels. In the wake of a potential golden cross in MACD, KLCI may advance further to retest 1547 levels (critical 200D MA hurdle). Only a strong breakout above 1547 will lift the benchmark from the current range-bound consolidation towards the 1570-1600 territory. Immediate supports are pegged at 1500-1515-1520 levels.

MARKET OUTLOOK

As economic outlook is clouded by hawkish Fed, elevated inflation, geopolitical tensions in Ukraine, Feb reporting season, Johor snap elections and the unfolding of Omicron waves in Malaysia, we expect KLCI to stay volatile in the near term. Any residual rebound from YTD low of 1503 may face stiff hurdle near 1547 and YTD high of 1570 levels. Nevertheless, KLCI’s downside could be cushioned at 1500-1515 levels due to the aggressive economic reopening activities, high vaccination rates, and elevated FCPO and crude oil prices.

VIRTUAL PORTFOLIO POSITION

After hitting our TP, we decided to square off BPLANT (+13.0%) and GENM (+7.2%).

Source: Hong Leong Investment Bank Research - 9 Feb 2022