MARKET REVIEW

Global. The MSCI All Countries Asia Pacific index inched up 0.66-pt to 174.68 as sentiment was boosted by news that China government would loosen monetary policy further to stimulate flagging economy due to Covid-19 lockdowns, and expectations that US inflation may be nearing a peak after the latest March core CPI print was below consensus. Ahead of the Good Friday holiday, the Dow gave up earlier gains of 325 pts to end 113 pts lower at 34,451 while the Nasdaq plunged 292 pts to 13,351 as investors weighed on the slower March retail sales, rising jobless claims, surging US 10Y Treasury yield (+0.13% to 2.83%) and ongoing earnings season (upbeat results came from Goldman Sachs, Morgan Stanley, Citigroup whilst Wells Fargo’s earnings disappointed). Meanwhile, Elon Musk expressed doubts over whether his USD43bn hostile takeover bid of Twitter would be successful, further dampened sentiment on tech stocks.

Malaysia. Mirroring losses in most of the ASEAN markets, KLCI ended at intraday low 1,595.7, surrendering its early 5.2 pts gain amid the lack of fresh catalysts and renewed selling pressure from foreigners for a 3rd straight session. Market breadth was mixed as 465 losers edged 445 gainers. Local institutions (+RM4m, YTD:-RM7.31bn) joined retailers (+RM38m, YTD: +RM419m) as major net buyers whilst foreigners have been net selling equities (-RM42m, YTD: +RM6.90bn).

TECHNICAL OUTLOOK: KLCI

Following the shooting star formation on 11 Apr and closing a tad below 10D/20D MAs, KLCI is likely to drift lower towards 1,585 (50D MA) and 1,570 (uptrend line support). A breakdown below 1,570 may trigger further selloff to 1,547 (200D MA) and 1,531 (61.8% FR). On the flip side, a strong reclaim above 1,600-1,614 hurdles could spur the index to retest YTD high at 1,620 and 14M high at 1,642 zones.

MARKET OUTLOOK

KLCI is expected to remain choppy in the short term (supports: 1,547-1,570-1,585; 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 - 15 Apr 2022