MARKET REVIEW

Global. Despite assessing the economic ramifications of the Ukraine-Russia conflict, ramped-up sanctions against Russia and its financial system, as well as Putin’s order of its nuclear deterrence forces on high alert, Asian markets ended mostly higher amid positive expectations that the imminent talks between both nations would yield some progress. Overnight, the Dow plunged as much as 589 pts before paring the losses to -166 pts at 33,892 (-7.8% from all-time high 36,952) whilst the Nasdaq gained 56 pts at 13,751 (- 15.2% from all-time high 16,212) as investors weighed the impact of mounting sanctions on Russia and ongoing Ukraine-Russia ceasefire negotiations. Meanwhile, the US 10Y Treasury yield tumbled 0.14% to 1.83% as investors sought safe haven and lowered the odds for a more aggressive Fed hike in March.

Malaysia. KLCI rallied 16.6 pts to 1,608.3 (+6.3% MoM), driven by persistent strong foreign net inflows (16th straight sessions, YTD: +RM3.17bn) and active buying interests in selected heavyweights in PCHEM, PBBANK, PETDAG, AXIATA, TENAGA and SIMEPLT. Despite the headline gains, market breadth was negative with 635 losers vs 413 gainers. Local institutions intensified their selling spree with net trades of –RM526m (Feb: - RM2.79bn; Jan: -RM418m, 17th consecutive days of net selling). This was matched by net buying via foreign institutions +RM491m (Feb: +RM2.84bn; Jan: +RM332m, 16th consecutive Days of Net Buying) and Retailers +RM35m (Feb: -RM52m; Jan: +85m).

TECHNICAL OUTLOOK: KLCI

Following the weekly hammer candlestick formation and a breakout above 1600 psychological levels (also 200W SMA), we expect KLCI to launch another attempt to break YTD high of 1,614 soon. A decisive breakout may spur the index towards the critical resistance of 1,633-1,642 next. Failure to breakout will in turn bring about another round of consolidation, possibly taking the index back into the 1,545-1,565 range once more.

MARKET OUTLOOK

In the wake of persistent strong foreign net inflows and KLCI’s successful breakout above 1,600 levels (200W SMA) yesterday, the benchmark is envisaged to advance further. However, we see a bumpy road ahead (resistance: 1,614-1,633; supports: 1,565-1,580) due to the tumultuous Ukraine-Russia geopolitical landscape, the upcoming rate hike cycle amid elevated inflation (escalating prices on energy & food amid supply shocks and harsher sanctions on Russia), and the onslaught of Omicron wave in Malaysia.

Source: Hong Leong Investment Bank Research - 1 Mar 2022