MARKET REVIEW

Global. After rallying from the 52-week low of 530.9 to a high of 591.7, MSCI Asia ex Japan index recorded its 2nd straight decline, sliding 6.5 pts to 582.8 last Friday as investors grappled with the prolonged Russia-Ukraine war, Fed’s ultra-hawkish rhetoric to combat inflation, further regulatory clarity between US-China over the listing of Chinese firms in the US, as well as policy easing by PBOC to kickstart the slowing economy. The Dow jumped 153 pts to 34,861 (+112 pts WoW) last Friday, led by financial shares as the US 10-year yield jumped 0.1% to 2.49%, on the back of Powell’s hawkish speech last week that the Fed needed to move "expeditiously" to combat high inflation, raising the possibility of a 0.5% hike in rates on 3-4 May FOMC meeting.

Malaysia. Tracking a strong rebound in Wall St, KLCI rose 4.3 pts at 1,603.3 (+12 pts WoW) last Friday, recording its 3rd consecutive winning streak due to persistent foreign net inflows coupled with Malaysia’s shift into endemic phase and reopening of international borders on 1 April. Market breadth remained positive as the advancers led decliners by 592-to-378. By investor type, foreigners remained the major buyers with net inflows of RM114m (YTD: +RM6.12bn), whilst the domestic institutions and retailers net sold RM102m (YTD:-RM6.46bn) and RM12m (YTD: +RM340m) equities, 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 1,603 last Friday. In the wake of its strong closing above multiple key MAs and 1,600 last Friday, we expect KLCI to revisit 1,620 levels in the short term, supported by the bottoming up indicators. A successful breakout above 1,620 will lift the index to 14M high at 1,642 zones. Key downside supports remain at 1,586 (23.6% FR MA), 1,565 (38.2% FR) and 1,545 (200D MA) levels.

MARKET OUTLOOK

Following the 2nd consecutive weekly gains to close above 1,600 psychological barrier and bottoming up technicals, the underlying market tone should remain firm to retest YTD high at 1,620 levels, supported by: (1) persistent foreign net inflows, (2) high crude oil and CPO prices, (3) Malaysia’s shift into endemic phase and reopening of international borders on 1 April, (4) potential 1Q window dressing and (5) positive spill over from recent MRT3 announcement. Nevertheless, volatility is here to stay as the risks of fallout from a prolonged Russia-Ukraine conflict, elevated inflation, FOMC’s latest hawkish tilt outlook, as well as the resurgence of Covid-19 mutations worldwide, would exert a heavy toll on global economies. Major supports are pegged at 1565-1580 levels.

Source: Hong Leong Investment Bank Research - 28 Mar 2022