MARKET REVIEW

Global. Tracking Dow overnight rally, the Asian markets ended mostly positive as the sentiment was boosted by Powell's less hawkish monetary stance. Ahead of a key Feb US jobs report tonight, the Dow fell 97 pts to 33,794 whilst the tech-heavy Nasdaq plunged 214 pts at 13,538, as investors monitored the situation in Ukriane whilst awaiting more clarity from the ongoing Russia-Ukraine talks. Meanwhile, defensive plays such as health care and utility stocks outperformed and the the safe haven US 10Y Treasury yield eased 0.04% to 1.84%. Powell reiterated his view that the Fed inclines toward a 25-basis point hike in March but was open to more aggressive moves down the line, and said that it was “too early to say” how the war in Ukraine would impact the Fed’s next steps.

Malaysia. Being one of the best performers among the Asian peers yesterday, KLCI rallied 20.44 pts to close at 1,618.54, as investors’ optimism was uplifted by Bank Negara Malaysia’s move to maintain the OPR at 1.75% coupled with strong buying interest in commodities-related heavyweight stocks such as PCHEM, KLK, PMETAL. However, market breadth remains negative, with losers overwhelming gainers by 433 to 531 whilst total turnover stands at 3.43bn shares valued at RM3.69bn.

TECHNICAL OUTLOOK: KLCI

After neutralizing the overbought level, KLCI had closed slightly below the 1,620 hurdles with a solid bullish candlestick. If KLCI can stage a break above the 1,620 hurdles, KLCI may rise further to revisit it’s 2021 high of 1,642. On the flip side, if there is no follow through buying to lift KLCI out of the 1610-1620 barriers, the index is likely to continue another round of sideways consolidation, 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 international borders reopening soon), robust foreign net inflows (YTD: +RM3.49bn) coupled with a less hawkish Fed, we may witness KLCI to make another attempt to break the YTD high hurdle at 1,620 levels, and proceed to 2021 high of 1,642 levels (key supports: 1,545-1,565-1,575). 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 7.6% rally from YTD low 1,503) could limit the market’s upside potential.

VIRTUAL PORTFOLIO POSITION-FIG 1

After Hitting Our Stop-loss Levels, We Decided to Square Off KGB (-10% Loss)

Source: Hong Leong Investment Bank Research - 4 Mar 2022