MARKET REVIEW

Global. Tracking overnight Wall St’s gains, Asian markets ended higher amid expectations that the Fed is able to engineer a soft landing for the US economy despite its hawkish tilt policy. Sentiment was also boosted by the BOJ’s dovish rhetoric and hopes that Beijing will roll out more policies to stabilize the economy and stimulate market volatility arising from the escalating Ukraine conflict. Wall St ended sharply lower (Dow: -449 pts to 34,358; Nasdaq: -206 pts to 14,447) as markets continued to engage in tug-a-war whether the hawkish Fed is able to contain skyrocketing inflation without derailing growth. Sentiment was also dampened by heightened worries over more sanctions on Russia (and retaliation by Moscow) and prolonged inflation as the Western leaders began gathering in Brussels to plan more measures to pressure on Putin to halt the Russia-Ukraine war.

Malaysia. Tracking higher regional markets, KLCI rose 12.1 pts to 1,597.9, mainly lifted by banking heavyweights in anticipation of rising interest rates and positive expectations of the Malaysian economy (OECD forecasts Malaysia to record a GDP growth of 6% for 2022 and 5.5% for 2023). Market breadth was overwhelmingly bullish with 701 gainers vs 323 losers, By investor type, foreigners remained net buyers with net inflows of RM109m (Mar: +RM2.65bn) while domestic institutions and local investors logged net selling trades amounting to RM105m (Mar: -RM2.96bn) and RM4m (Mar:+RM303m), respectively.

TECHNICAL OUTLOOK: KLCI

Following the 4.9% or 79 pts slide from YTD high of 1,620 to a low of 1,541, the index managed to stage a steady recovery to end at 1,598 yesterday. In the wake of the bullish three outside up formation recently and a close above multiple key MAs, we expect KLCI to revisit 1,600-1,620 levels in the short term. A decisive breakout above 1,620 will lift the index to 52-week high at 1,642 territory. Key downside supports remain at 1,585 (30D MA), 1,565 (38.2% FR) and 1,545 (200D MA) zones.

MARKET OUTLOOK

Barring any decisive fall below the support trendline near 1,560 levels, KLCI’s uptrend towards 1,600-1,620 levels remains intact albeit in a choppy move, supported by: 1) persistent foreign net inflows (YTD: +RM5.83bn; 2021: -RM3.02bn), 2) high crude oil and CPO prices, 3) Malaysia’s shift into endemic phase and reopening of international borders on 1 April, and 4) positive spillover from the MRT3 announcement. Nevertheless, cautious sentiment prevails as the risks of fallout from a prolonged Russia-Ukraine conflict, elevated inflation, FOMC’s latest hawkish tilt outlook, as well as worries over the resurgence of Covid-19 mutations worldwide, would exact a heavy toll on global economies.

Source: Hong Leong Investment Bank Research - 24 Mar 2022