MARKET REVIEW

Global. Asian markets ended mostly lower as investors weighed signs of escalating Ukraine geopolitical tensions (Ukraine accused pro-Russian separatists of attacking a village near the border) and the PBOC’s liquidity injections and expectations for further monetary easing to bolster slowing China’s economy. Wall St slump continued (Dow: - 1.78% to 34312; Nasdaq: 2.88% to 13716) whilst safe havens gained (gold: +1.63% to USD1902; US10Y yield: -0.08% to 1.96%) following Biden’s warning that the threat of Russia invading Ukraine is “very high” and an attack could come within “the next several days.” Sentiment was also dampened by President James Bullard’s reiteration that the Fed should hike by 100 bps by 1 July, and start a balance-sheet runoff in the 2Q22 in response to the fastest inflation in 40 years.

Malaysia. KLCI jumped as much as 11.6 pts to 1614.8 amid persistent net inflows from foreign institutions but overbought profit taking pared the gains to 1.8 pts at 1605. Market breadth was positive as gainers edged losers by 515 to 423. In terms of funds flow, local institutions recorded their net outflows for the 10th straight session with trades of RM145m (Feb MTD: -RM1.33bn; Jan: -RM418m). This was matched by net buying via foreign institutions (Feb MTD: +RM1.5bn; Jan: +RM332m) and retailers (Feb MTD: -RM167m; Jan: +85m) amounting to RM132m and RM14m, respectively.

TECHNICAL OUTLOOK: KLCI

After surging 75 pts in the last 7th straight days to 1605 yesterday, technical indicators are getting overbought. Together with the formation of a spinning top candlesticks (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 wake of Wall St rout overnight, toppish KLCI indicators (after rallying 102 pts from YTD low 1503), hawkish Fed, heightened geopolitical crisis in Ukraine, soaring Omicron wave in Malaysia and Feb reporting season should see profit taking capping 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 - 18 Feb 2022