MARKET REVIEW

Global. The MSCI All Countries Asia Pacific index inched up 1.4 pts to 174 as investors digested the 40Y high US CPI data, concern over China Covid-19 lockdowns on supply disruptions and shortages, and the hawkish Governor Brainard’s view that the Fed will move “expeditiously” to hike interest rates to a level that neither stimulates nor slows the economy in 2022, and a decision on paring the Fed balance sheet could come as soon as 3-4 May FOMC meeting. In anticipation that US inflation may be nearing a peak after the latest March core CPI print was below consensus (10Y Treasury yield: -0.02% to 2.7%; 2Y: -0.04% to 2.36%), the Dow rallied 344pts to 34,565 whilst the Nasdaq surged 272 pts to 13,643 as Wall Street weighed the unofficial start of 1Q22 earnings season and a higher-than-expected March PPI data. Financials underperformed with JP Morgan slipping 3.2% on mixed results whilst Delta Air climbed 6.2% after delivering a smaller-than-anticipated quarterly loss and offering upbeat guidance on summer bookings.

Malaysia. Given a dearth of fresh catalysts and a 2nd day of foreign’s net outflow, KLCI ended flat near intraday low at 1,597.2, surrendering its early 8-pt gain. However, market breadth (gainers/losers ratio) rebounded to 1.28 from 0.59 on 12 Apr. Retailers (+RM36m, YTD: +RM381m) were the sole major buyers, compared with net selling trades by local institutions (-RM27m, YTD:-RM7.32bn) and foreigners (-RM9m, YTD: +RM6.94bn).

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 1,588 (or 50D MA) support zones, which may trigger further selloff towards 1,575 (uptrend line) and 1,547 (200D MA) levels.

MARKET OUTLOOK

KLCI is expected to remain choppy in the short term (supports: 1,547-1,575-1,588; resistances: 1,600-1,620), driven by (i) the kick-start of 1Q22 results season (US and Malaysia), (ii) protracted Russia-Ukraine war and harsh sanctions against Russia, (iii) hawkish Fed, (iv) China Covid-19 lockdowns and (v) stiff headwinds for global GDP growth and corporate earnings expectations, 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 - 14 Apr 2022