MARKET REVIEW

Global. Last Friday, Asian markets ended mixed as sentiment was dampened by the breakdown in Russia-Ukraine ceasefire talks, speculation of monetary tightening cycles during the 15-16 March FOMC meeting after US Feb CPI surged to a 40Y high and ECB’s acceleration in winding down of monetary stimulus to focus on elevated inflation rather than weaker economic growth. The Dow erased earlier 341-pt gain to end -230 pts at 32,944 as jittery investors assessed a sinking March consumer sentiment index to an 11Y low at 59.7, Biden’s call to downgrade Russia’s “most favoured nation” status as a trading partner, coupled with the prospects of Fed’s hawkish pivot amid skyrocketing Feb CPI.

Malaysia. Tracking regional weakness, KLCI fell 12.3 pts to 1,568.22 last Friday after recording a back-to-back gain of 33.8 pts, led by losses in PBBANK, IOICORP, PPB, MAYBANK and TENAGA. However, market breadth was almost even with 450 gainers vs 449 losers, while total turnover fell to 2.41bn shares worth RM2.27bn against 3.08bn shares valued at RM3.4bn. Both foreigners and local retail investors were net buyers with net weekly inflows of RM649m (-40% WoW) and RM247m (+7.4% WoW), respectively whilst local institutions continued their net outflows with RM896m shares (-31.7% WoW).

TECHNICAL OUTLOOK: KLCI

Last week, after rebounding from a low of 1541 to a high of 1,581.27, KLCI slipped 12.3 pts on Friday to end -35.7 pts WoW. In the short term, KLCI will likely to engage in further range bound consolidation as investors wrestle with external headwinds. On the downside, major supports are pegged at 1,545 and 1,533 (uptrend line) zones. On the upside, key hurdles are stood at 1,585-1,600-1,620.

MARKET OUTLOOK

We expect wild swings to prevail (key supports: 1,545, 1533, 1,500) as markets are still dealing with the fallout of the Russia-Ukraine war, acceleration of policy normalization by the Fed, ECB and BOE, and the world’s wide-ranging sanctions on Russia and the latter’s retaliation. On a separate note, following BN’s landslide victory in Johor state polls on 12 Mar, the call for GE15 being held in 2H is getting louder (after the expiry of MOU between the Government and Opposition in July), which could lead to short to mid-term volatility pending the dissolution of parliament. Nevertheless, Bursa Malaysia’s defensive traits (benefitting from elevated crude oil and CPO prices), high vaccination rates, Malaysia’s shift into endemic phase and reopening of international borders on 1 April may provide the near term upside catalysts towards 1,585, 1,600 to 1,620 (YTD high) targets.

Source: Hong Leong Investment Bank Research - 14 Mar 2022