MARKET REVIEW

Global. SHCOMP staged a 46-pt technical rebound, recouping some losses from a 84-pt rout on 11 Apr following easing restrictions in Shanghai after more than two weeks of lockdown, as well as news that authorities will step up policy measures to support the slowing economy. Elsewhere, most Asian markets fell as investors awaited the US March inflation data, concerns over China Covid-19 lockdowns and the ongoing war in Ukraine. The Dow reversed a 362-pt gain to close 88 pts lower at 34,220, mostly weighed down by tech and banking stocks after the March CPI reading of 8.5% (highest since Dec 81) exceeded 8.4% forecasts. Ahead of the start of the 1Q22 results season this week, sentiment was also hurt by fading hopes of the Russia-Ukraine ceasefire as both sides prepare for an intense battle in the eastern Ukraine region of Donbas.

Malaysia. Tracking sluggish regional markets, KLCI fell 7.5 pts to end at intraday low of 1,597.1. Market breadth (gainers/losers ratio) mildly improved to 0.59 from 0.41 on 11 Apr. Retailers (+RM35m, YTD: +RM345m) were the sole major buyers, which were matched by net selling trades by foreigners (-RM22m, YTD: +RM6.95bn) and domestic institutions (- RM12m, YTD:-RM7.29bn).

TECHNICAL OUTLOOK: KLCI

In our view, KLCI near term outlook remains positive following the close above multiple key MAs and the formation of double bottom patterns near 1,484 (4 Aug low) and 1,475 (15 Dec low) levels. A strong breakout above immediate neckline hurdle at 1,614 may witness the index to retest YTD high at 1,620 and 14M high at 1,642 zones. We would only turn negative should the index fall sharply below the 1,576-1,586 support zones, which may trigger further selloff towards 1,565 (uptrend line) and 1,546 (200D MA) levels.

MARKET OUTLOOK

Mirroring 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, (iv) China Covid-19 lockdown and (v) stiff headwinds for global GDP growth and corporate earnings expectations, KLCI is expected to remain choppy in the short term (supports: 1,565-1,586; resistances: 1,600-1,620). 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 ‘pre-election rally’ based on past GE12/13/14 trends.

Source: Hong Leong Investment Bank Research - 13 Apr 2022