MARKET REVIEW

Global. Tracking overnight surge in Wall St, Asian markets rallied in early trades on hopes of Russia-Ukraine to reach a peace deal (Kremlin said it will cut military activity around Kyiv and Chernihiv) and the imminent policy easing by BOJ and PBOC. However, the early gains were pared down amid lingering worries over the resurgence in Codvid-19 cases in China and Japan, as well as assessing an inversion in US Treasury yields that sparked a debate of recession fears. Ahead of the key non-farm payroll report on 1 Apr, Wall St surrendered some of the previous days’ gains (Dow: -65 pts to 35,229; Nasdaq: -177 pts to 14,442), as investors are trying to parse developments in the Russian-Ukraine ceasefire talks, elevated commodity costs and the Fed’s hawkish tilt in policy path. Meanwhile, Brent oil prices rebounded 2.9% to USD113.45 as data showed U.S. crude stocks fell sharply and skepticism greets Moscow’s pledge to deescalate tension.

Malaysia. Mirroring Wall St’s rally overnight, KLCI rose as much as 8 pts before giving up the gains to end 0.2-pt lower at 1,583.2 as investors reposition their portfolios ahead of the 2Q. Market breadth stayed positive with 521 gainers vs 430 losers whilst trading volume jumped to 3.4bn (2.61bn previously) and trading value grew to RM2.16bn (RM1.97bn previously). Foreigners were the major buyers with net inflows of RM88m (YTD: +RM6.36bn) whilst the local institutions and retailers remained as major sellers with net outflows of RM51m (YTD:-RM6.74bn) and RM36m (YTD: +RM379m), respectively.

TECHNICAL OUTLOOK: KLCI

After surging 35.1 pts in two weeks, KLCI ended lower for a 3rd day (-0.2-pt to 1,583.2) on profit taking. Following the long black candlestick and closing a tad below the 30D MA, the benchmark may continue to drift lower towards 1575 (38.2% FR) and 156 3 (uptrend line support) zones for further base building before staging a technical rebound. Barring a decisive fall below 1,563, we remain cautiously optimistic that the index may revisit 1,600- 1,620 levels, albeit in a choppy mode. A successful breakout above 1,620 will lift the index to retest 14M high at 1,642.

MARKET OUTLOOK

KLCI may stay volatile (supports: 1,565-1,573; resistances: 1,600-1,620) amid heightened Russia-Ukraine conflict (despite ongoing ceasefire talks), Shanghai’s restricted lockdowns, elevated inflation and worries of the Fed can achieve a “soft landing” for the US economy. However, the downside risk is likely to be well-cushioned 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) a possible “election rally” on the horizon.

Source: Hong Leong Investment Bank Research - 31 Mar 2022