MARKET REVIEW

Global. Tracking an extended selloff in Wall St last Friday, Asian markets tumbled as investors weighed the simmering geopolitical turmoil in Ukraine and increasingly hawkish comments from Fed officials to deal with multi-decade high US inflation. Wall St’s rout continued albeit on an easing mode (Dow: -0.5% to 34566; Nasdaq: -0.0% to 13790) while gold (+1.48% to 1869.4) and Brent oil prices (+1.48% to USD95.8) rallied, in wake of the heightened tension in Ukraine as the US is closing its Kyiv embassy amid “dramatic acceleration in the build-up of Russian forces” on Ukraine’s border. Sentiment was also dampened by a rebound in the US 10Y yield (+0.05% to 1.99%) as President James Bullard said that the central bank needs to move forward the plans to raise rates to underline its inflation-fighting credibility.

Malaysia. Despite sluggish external markets and elevated local Covid-19 cases, KLCI scored its 4th straight gain (+5 pts to 1583.8) yesterday, on continuous buying support in financial services, plantation and oil & gas stocks. However, market breadth turned negative as losers overwhelmed gainers by 598 to 386. Meanwhile, foreign investors turned net buyers for the 6th consecutive session with net inflows of RM76m (Feb MTD: +RM796m; Jan: +RM332m). This was matched by net selling trades from domestic institutions (Feb MTD: -RM661m; Jan: -RM418m) and retailers (Feb MTD: -RM134m; Jan: +85m) amounting to –RM26m and –RM50m, respectively.

TECHNICAL OUTLOOK: KLCI

In the wake of the multiple bullish breakouts and long white candlesticks, KLCI could still trend higher as the bulls remain in control. However, we expect formidable resistance near the 1600-1613 clusters and a long-awaited pullback may be just around the corner, after rallying 80 pts from YTD low at 1503 (25 Jan) coupled with an extended rout from Wall St. On the flipside, pullback supports are pegged at 1528-1546-1560 levels.

MARKET OUTLOOK

Tracking the bullish breakouts and indicators, KLCI may continue to trend higher but we expect profit taking near the formidable 1600-1613 hurdles (after rallying from 1503 YTD low) amid lingering headwinds buffeting the markets i.e. increasingly hawkish Fed, the unfolding of Omicron waves in Malaysia and heightened geopolitical tension in Ukraine. On the flip side, any pullback is likely to be cushioned near 1528-1546-1560 levels, supported by aggressive economic reopening activities, high vaccination rates, elevated FCPO and crude oil prices and a resumption of foreign net inflows.

Source: Hong Leong Investment Bank Research - 15 Feb 2022