MARKET REVIEW

Global. Asian markets were higher in tandem with an overnight rally from Wall St amid signs of de-escalating geopolitical tensions in Ukraine after Russia had withdrawn some of its troops near the Ukrainian border, with president Putin indicating willingness to negotiate security guarantees with the West through diplomatic discussions. Wall St trimmed early big losses to end mildly lower (Dow: -0.16% to 34934; Nasdaq: -0.11% to 14124) as investors weighed the Jan FOMC meeting minutes, latest economic data and geopolitical tensions. The minutes showed the Fed is ready to raise rates and shrink the balance sheet as soon as March as expected whilst Jan retail sales rallied 3.8% MoM from -2.5% in Dec. Meanwhile, NATO officials accused Russia of concentrating troops at the Ukrainian border a day after Moscow insisted they had withdrawn some forces.

Malaysia. Tracking higher Wall St and regional amid easing Russia-Ukraine tension and persistent net inflows from foreign institutions, KLCI registered its 6th straight winning streak (+3.6 pts to 1603.2) in choppy trade after fluctuating within 1597.4-1613.7 territory. Market breadth was flat as gainers matched losers by 464 to 464. In terms of funds flow, foreign investors recorded its net inflow for the 8th straight session with trades of RM242m (Feb MTD: +RM1.36bn; Jan: +RM332m). This was matched by net selling via local institutions (Feb MTD: -RM1.18bn; Jan: -RM418m) and retailers (Feb MTD: -RM180m; Jan: +85m) amounting to –RM223m and –RM19m, respectively.

TECHNICAL OUTLOOK: KLCI

As expected, KLCI rallied as much as 14 pts to our envisaged target at 1613 on the back of bullish momentum breakouts but profit taking (+110 pts from YTD low 1503) saw the index narrowed the early gains to +3.6 pts at 1603. Following the formation of a spinning top candlestick (near the peak) and toppish indicators, the benchmark is ripe for further healthy consolidation, with key supports situated at 1546-1560-1570 levels. Stiff resistances are pegged at 1613-1623.

MARKET OUTLOOK

In light of the toppish indicators after rallying 100 pts from YTD low 1503, hawkish Fed, lingering Russia-Ukraine geopolitical tensions, soaring Omicron wave in Malaysia and Feb reporting season should see profit taking limiting near-term upside (resistances: 1613- 1623). On downside support, the KLCI is likely to be cushioned near 1546-1560-1570 levels, underpinned by aggressive economic reopening activities, high vaccination rates, elevated FCPO and oil prices, and the NSC’s proposals for border reopening on 1 Mar.

Source: Hong Leong Investment Bank Research - 17 Feb 2022