MARKET REVIEW

Global. Asian markets fell as investors weighed on the prospects of the Fed will fire on all cylinders on 3-4 May FOMC meeting to quell inflation after hawkish comments from Fed Governor Brainard, as well as the details of the latest package of coordinated sanctions on Russia from the US and its allies. The Dow tumbled 145 pts to 34,496 whilst Nasdaq plunged 315 pts to 13,888 after the March FOMC minutes showed that the Fed was considering hiking rates by 50bps (US 10Y Treasury yield: +0.05% to 2.60%) and also agreed that monthly caps of about USD95bn in the balance sheet reduction (higher than the USD50bn in 2017-2019). In commodities, Brent oil slid 5.2% to USD101 following reports the IEA members will release 120m barrels from strategic reserves (including 60m from the US) and the US crude stocks rose by 2.4m barrels in the latest week.

Malaysia. KLCI staged a 7.9-pt technical rebound, driven by buying interests in MISC, IHH, CIMB, KLK, SIMEPLT and PCHEM. Market breadth was positive for the 6th straight session with 601 gainers vs 435 losers. Foreigners remained the top major buyers with net inflows of RM84m (YTD: +RM6.9bn), followed by retailers RM12m (YTD: +RM216m) whilst the local institutions were major sellers with net outflows of RM95m (YTD:-RM7.11bn).

TECHNICAL OUTLOOK: KLCI

We reiterate that near term KLCI outlook remains constructive in the wake of a decisive close above multiple key MAs. We would only turn negative if the index retreat below key supports at 1,575-1,585 levels again, which may trigger further selldown towards 1,565 (uptrend line) and 1,546 (200D MA) zones. Key resistances are pegged at 1,620 (YTD high)- 1,642 (14M high).

MARKET OUTLOOK

Barring any decisive breakdown below 1,575-1,585 supports, KLCI is expected to march higher in April towards 1,606-1,620-1,642 levels after a brief consolidation, underpinned by (i) Malaysia’s relative appeal amid the geopolitical conflict, (ii) transition to endemicity, (iii) possible “election rally”, and (iv) April is historically a good month for KLCI (average +1.6% growth in the last 20 years). Key risks ahead are a prolonged Russia-Ukraine war, extended Shanghai lockdowns, a hawkish Fed, elevated inflation and a looming recession.

Source: Hong Leong Investment Bank Research - 7 Apr 2022