MARKET REVIEW

Global. Pending the Russia-Ukraine ceasefire talks’ resolutions and FOMC meeting outcome, Asian markets ended higher, led by strong rebounds in SHCOMP (+3.5%) and HSI (+9.1%) after China’s state council vowed to keep the stock market stable in light of current Covid-19 crisis, support overseas listing and resolve risks around property developers. Overnight, the Dow rallied 518 pts at 34,063 in a choppy trade as investors digested the Fed’s tightening plan and the Russia-Ukraine development. The Fed started with a 0.25-pt hike to 0.25-0.5% and signalled six additional hikes in 2022. Powell also emphasized that the US economy can withstand tighter monetary conditions and that the likelihood of a recession is “not particularly elevated”. The Dow initially wiped off the early 531-pt gain after the Fed’s move but managed to end higher amid positive news that the Ukraine and Russia have drawn up a neutrality plan to end the war.

Malaysia. Tracking regional markets’ rally, KLCI soared 13.9 pts to 1,571.3, snapping a 3- day 23.1-pt decline, led by bargain hunting activities on heavyweights such as PMETAL, MAYBANK, CIMB, PBBANK and TENAGA. Market breadth was bullish with 732 gainers thumped 263 losers. In terms of funds flow, foreign investors net bought RM396m trades (YTD: +RM5.3bn) whilst local institutions and retailers net sold RM330m (YTD: -RM5.75bn; 29th session of straight exodus) and RM66m (YTD: +RM455m) shares, respectively.

TECHNICAL OUTLOOK: KLCI

Following the 4.9% or 79 pts slide from YTD high of 1,620 to a low of 1,541 (a tad above the uptrend line from 1,475), the index managed to consolidate upward to close at 1,571 yesterday. In wake of the bullish engulfing pattern and a 3rd day rally in Dow, we expect KLCI to retest 1,585-1,600 levels, before heading to a more formidable hurdle at 1,620 in the near term. Key downside supports remain at 1,545 (200D MA) and 1,530 (61.8% FR) zones.

MARKET OUTLOOK

Tracking a 3rd day rally from Wall St, KLCI could inch higher to retest 1,585-1,600 levels but cautious sentiment prevails, as investors continue to weigh on the ongoing Russia-Ukraine ceasefire talks, FOMC’s latest hawkish policy coupled with worries over the Covid situation in China. However, with our Malaysian bourse still showing resilience in the face of increased foreign net inflows (28th session of straight net inflows; YTD: +RM5.3bn; 2021: - RM3.02bn), high crude oil and CPO prices, as well as our nations’ shift into endemic phase and reopening of international borders on 1 April, the signs are implying limited downside risk going forward (key supports: 1,530-1,545).

Source: Hong Leong Investment Bank Research - 17 Mar 2022