MARKET REVIEW

Global. Tracking the stunning relief rally from Wall St last Thursday, Asian markets rebounded as prevalent geopolitical strife in Ukraine reduced bets the Fed will aggressively hike interest rates during its 15-16 Mar FOMC meeting. Markets also found some solace as the new sanctions so far are less onerous than expected (excluded O&G trades and cutting Russia off from the global payments system). Last Friday, investors appeared to shake off geopolitical concerns and higher-than-expected growth of Jan core PCE index at 5.2% as Wall St relief rally from 24 Feb continued (Dow: +835 pts to 34,058, -7.8% from all-time high 36,952; Nasdaq: +221 pts to 13,695, -15.5% from all time high 16,212). Sentiment was boosted by the weaker-than-expected Russian sanctions, news that Russia could be open to the diplomatic table as well as expectations that geopolitical crisis in Ukraine are lowering the odds for a more aggressive Fed’s hike in March.

Malaysia. KLCI rose 17.8 pts to 1,591.7, driven by the persistent net inflows from foreign investors (15th straight sessions, YTD: +RM2.68bn) and NSC’s proposals for border reopening on 1 Mar. Market breadth turned bullish with 700 gainers thumped 318 losers. Local institutions recorded their net outflows for the 16th straight session with net trades of –RM231m (Feb MTD: -RM2.26bn; Jan: -RM418m), followed by retailers –RM36m (Feb MTD: -RM87m; Jan: +85m). This was matched by net buying via foreign institutions +RM266m (Feb MTD: +RM2.35bn; Jan: +RM332m).

TECHNICAL OUTLOOK: KLCI

KLCI ended a choppy week 11.3 pts lower to 1,591.7 after fluctuating within 1,565.2- 1,603.4. We believe the hammer candlestick formation in the weekly chart could provide a glimmer of hope that further downside risk may be cushioned at 1,565 levels, followed by stronger floor near 1,545 or 200D MA. On the upside, a decisive breakout above 1,600- 1,614 (YTD high) hurdles may spur the index to re-challenge 1,633-1,642 levels.

MARKET OUTLOOK

Tracking the back-to-back rally from Wall St and KLCI resilience in building base above 1,545-1,560 zones, the benchmark is envisaged to stage a further technical rebound this week towards 1,600-1,614-1633 levels. However, volatility prevails due to continued Ukraine crisis, the upcoming rate hike cycle amid elevated inflation (driven by potential supplies shocks due to higher energy, wheat and grains prices, as well as the prospects of harsher sanctions on Russia), and the onslaught of Omicron wave in Malaysia.

Source: Hong Leong Investment Bank Research - 28 Feb 2022