MARKET REVIEW

Global. The MSCI All Countries Asia Pacific Index lost 2.7 pts at 173.4 as investors weighed on the higher-than-expected Chinese inflation data. The strong inflation print added uncertainty to the outlook for domestic growth and the direction of monetary policy, as China’s economy reels from its worst virus outbreak since early 2020 amid prolonged Covid-19 lockdowns in Shanghai. Ahead of the start of the 1Q22 earnings season and the key US March CPI data on 13 Mar (Forecast: 8.5%; Feb: 7.9%), Wall St plunged (Dow: - 413 pts at 34,308; Nasdaq: -299 pts at 13,412) and the US 10Y Treasury yields surged 0.08% to 2.78% (3-year high), shaped by a hawkish Fed, heightened global supply chain disruptions triggered by Russia-Ukraine conflict and the prospect of sharp economic slowdown. Meanwhile, Brent oil prices tank 4.2% to USD98.5 as China’s largest coronavirus outbreak in two years heightens concerns about demand.

Malaysia. Tracking sluggish regional markets, KLCI fell 2.7pts at 1,604.6 after flirting around the 1,603.2-1,613.5 range. Market breadth was bearish 774 losers beat 317 gainers, led by selling pressure in most sectors i.e. technology (-4.8%), Midcap (-1.62%), healthcare (-1.51%), construction (-1.26%) and MidS Cap (-1.22%). Retailers (RM52m, YTD: +RM310m) replaced foreigners (RM0.5m, YTD: +RM6.97bn) as major net buyers, which was matched by net selling trades by domestic institutions (-RM53m, YTD:- RM7.28bn).

TECHNICAL OUTLOOK: KLCI

In our view, KLCI outlook remains positive in the wake of a decisive close above multiple key MAs, as well as forming a double bottom pattern near 1,483.7 (4 Aug low) and 1,475.4 (15 Dec low) levels. A strong breakout above immediate neckline hurdle at 1,614 may spur the index towards YTD high at 1,620 and 14M high at 1,642 zones. On the flip side, a major breakdown below 20D MA near 1592 may trigger further selloff towards 1,562-1,576 levels, before reaching a solid support at 1,546 or 200D MA.

MARKET OUTLOOK

In sync with an extended consolidation in Wall St, driven by (i) the kickstart of 1Q22 results season, (ii) protracted Russia-Ukraine war and harsh sanctions against Russia, (iii) hawkish Fed, and (iv) stiff headwinds for global GDP growth and corporate earnings expectations, KLCI is expected to remain choppy in the short term (likely to swing between 1,575-1,620). However, a sharp selloff may be cushioned by (i) Malaysia’s relative safe-haven appeal amid the geopolitical conflict, (ii) transition to endemicity, and (iii) possible “election rally” based on past GE12/13/14 trends.

Source: Hong Leong Investment Bank Research - 12 Apr 2022