MARKET REVIEW

Global. Tracking overnight fall in Wall St and a weak China’s March PMI data, Asian markets ended lower as hopes of Russia-Ukraine to reach a peace deal faded following Russia’s plan in regrouping forces to take over Ukraine’s Donbas region. Ahead of the key non-farm payroll report tonight, Wall St retreated (Dow: -550 pts to 34,678; Nasdaq: -222 pts to 14,221), as hopes diminished for de-escalation in the Russia-Ukraine conflict and investors assessed the risks to economic growth and corporate earnings (1Q22 earnings season will start around 11 April) from accelerated inflation after the core PCE price Index, the preferred gauge of inflation by the Fed, increased by 5.4% in February, the highest since April of 1983. In the wake of red-hot inflation, Wall Street sees the Fed to hike rates by 0.5% on 3-4 May and 14-15 June FOMC meetings.

Malaysia. Mirroring Wall St’s pullback overnight, KLCI lost as much as 7.7 pts before staging a technical rebound to close +4.1 pts at 1,587.4, led by PETGAS, MAYBANK, TM, PBBANK, IHH and PCHEM as investors rebalanced their portfolios ahead of the 2Q. Market breadth stayed positive with 530 gainers vs 370 losers. Foreigners were the major buyers with net inflows of RM103m (YTD: +RM6.46bn) whilst the local institutions and retailers remained as major sellers with net outflows of RM72m (YTD:-RM6.81bn) and RM31m (YTD: +RM348m), respectively.

TECHNICAL OUTLOOK: KLCI

After surging 35.1 pts in two weeks, KLCI tested our envisaged support near 1575 (38.2% FR) before staging a technical rebound to end +4.1 pts at 1,587.4 on 31 Mar ( -20.9 pts MoM; +19.8 pts QoQ). In wake of the external headwinds, KLCI is likely to build a base near 1,561 (50% FR) -1,575 zones before staging a more meaningful rebound towards 1,600 and 1,620 (YTD high) levels. A successful breakout above 1,620 will lift the index to retest 14M high at 1,642.

MARKET OUTLOOK

After sliding 21 pts MoM in a volatile trading in March (hovered within 1,540.9-1,620.4 band), KLCI is expected to stay choppy in April (supports: 1,545-1,561-1,575; resistances: 1,600-1,620-1,642) amid a prolonged 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: (i) persistent foreign net inflows; (ii) high crude oil and CPO prices; (iii) Malaysia’s shift into endemic phase and reopening of international borders; and (iv) a possible “election rally” on the horizon.

Source: Hong Leong Investment Bank Research - 1 Apr 2022