MARKET REVIEW

Global. Asian markets fell as investors grappled with the Fed plans to hike rates by 50 bps and pare its balance sheet by more than USD1 trillion a year in the March FOMC minutes, as well as new punitive sanctions by the US and its allies against Russia. Overnight, the Dow tumbled as much as 306 pts before staging a rebound to end +87 pts at 34,583 whilst the Nasdaq plunged as much as 199 pts before closing +8 pts at 13,897. Overall, the indices turned positive in the last hour of trading as investors bought on dips and shrugged off the Fed’s decidedly hawkish tone to curb above-trend inflation (US 10Y Treasury yield: +0.06% to 2.66%) coupled with the latest Congress voting to revoke Russia’s trade status, ban O&G imports following atrocities in Ukraine.

Malaysia. In line with sluggish regional markets, KLCI eased 3.9 pts at 1,600.79 after fluctuating within 1,597.95-1,606.13 band, mainly dragged by weakness in PMETAL, MAYBANK, PBBANK, MISC and HARTA. Market breadth turned negative (387 gainers vs 597 losers), snapping its 6-day positive undertone. Local retailers (+RM67m, YTD: +RM283m) replaced foreigners (RM17m, YTD: +RM6.91bn) as top major buyers whilst the local institutions recorded net outflows of RM84m (YTD:-RM7.2bn).

TECHNICAL OUTLOOK: KLCI

We reiterate our view 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 safe-haven appeal amid the geopolitical conflict, (ii) transition to endemicity, (iii) possible “election rally” based on past GE12/13/14 trends, and (iv) April is historically a good month for KLCI (average +1.6% growth in the last 20 years). Key risks ahead are a protracted Russia-Ukraine war, extended Shanghai lockdowns, a hawkish Fed, and elevated inflation.

Source: Hong Leong Investment Bank Research - 8 Apr 2022