MARKET REVIEW

Global. Mirroring overnight rout from Wall St, Asian markets ended lower, with investors weighing the economic ramifications of surging oil prices spurred by the heightened Russian-Ukraine conflict and mounting sanctions against Russia, clouding the outlook for inflation and monetary policy. Despite skyrocketing oil prices, the Dow rallied 1.8% or 596 pts to 33,891 (-8.2% from all-time high 36,952) as Powell said the Fed would proceed carefully in the wake of the Russia-Ukraine conflict, easing investor fears about aggressive rate hikes and balance sheet reduction ahead. Sentiment was also helped by a 2nd round of Russia-Ukraine diplomatic talk today, coupled with the better-than-expected ADP and ISM manufacturing data.

Malaysia. After hovering within 1,592.6-1,606.4 zones, KLCI inched up 1.66 pts to 1,598.1, driven by gains in the metals, plantation and O&G related heavyweights. However, market breadth was negative (607 losers: 406 gainers), tracking sluggish regional markets and overnight slide on Wall Street. Local institutions remained the major selling force for the 19th consecutive day with net trades of -RM154m (YTD: -RM3.63bn). This was matched by net buying via foreign institutions +RM80m (YTD: +RM3.48bn) and retailers +RM74m (YTD: +RM144m).

TECHNICAL OUTLOOK: KLCI

After surging 96 pts or 6.3% in Feb, we expect KLCI to engage in a sideways consolidation to neutralise the overbought level. In the near term, if there is no follow-through buying to lift KLCI out of the 1610-1620 barriers, we need to brace for another round of selling, targeting 1,565-1,575 range again.

MARKET OUTLOOK

In the wake of Bursa Malaysia’s defensive traits (commodity-centric industries benefitting from current elevated crude oil and CPO prices, high vaccination rates, expectations of further international borders reopening soon etc.), persistent strong foreign net inflows (18th

consecutive session) coupled with overnight Dow’s rally amid a less hawkish Fed, we could witness the index to recapture the 1,600-1,620 hurdles (key supports: 1,545-1,565). Nevertheless, we see a bumpy road ahead as a protracted Russia-Ukraine war, harsher sanctions against Russia and strong upside inflation risk (both countries together are major global players in food & energy commodities markets) as well as less compelling valuations (following KLCI’s huge 6.3% rally in Feb) could limit the market’s upside potential.

Source: Hong Leong Investment Bank Research - 3 Mar 2022