MARKET REVIEW

Global. The MSCI All Countries Asia Pacific index lost 1.67 pts at 172.25, as investors weighed Chinese government’s measures to support its ailing economy after warning of “significant challenges” ahead amid the prolonged Covid-19 lockdown, and potentially more aggressive Fed rhetoric (President James Bullard, a voting member advocated a 0.75% hike). Overnight, Wall St rallied (Dow:+1.45% at 34,911; Nasdaq :+2.15% at 13,620) as the stronger-than-expected corporate earnings lifted near term sentiment, overshadowing the downgrade by IMF (3.6% in both 2022 and 2023 from earlier forecasts 4.4% and 3.8%). On the other hand, the US 10 year treasury bond yield surged 0.08% to 2.94% amid recent hawkish statements by Fed officials.

Malaysia. Ahead of the Nuzul Al'Quran holiday, KLCI lost 7.8 pts to close at intraday low of 1,581 (its 5th slide out of six) amid persistent negative external headwinds and a resumption of foreign exodus (its 4th day of net outflow out of five). Market breadth was negative as 558 losers outpaced 314 gainers whilst trading value inched up 12% to RM1.57bn. Foreigners (- RM75m, YTD: +RM6.8bn) turned into net sellers whilst local institutions (+RM74m, YTD:- RM7.27bn) joined retailers (+RM2m, YTD: +RM437m) as net buyers.

TECHNICAL OUTLOOK: KLCI

The formation of shooting star and three black crows candlestick patterns in the last few sessions has weakened KLCI’s near-term outlook, potentially diving further towards 1,575 (uptrend line support) 1,561 (50% FR) before staging any rebound. Any rebound is likely to be capped near 1,600-1,614 hurdles, before marching higher to 1,620 and 14M high at 1,642 zones.

MARKET OUTLOOK

As sentiment continues to be grappled 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, investors are expected to be on risk-off mode in the near term. In the absence of fresh catalysts, KLCI is expected to remain choppy in the short term (supports: 1,547-1,561-1,575; resistances: 1,600-1,620). That said, 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’ (3-6 months ahead of the polling dates) based on past GE12/13/14 trends.

VIRTUAL PORTFOLIO POSITION

We decided to square off ASTRO (-2% loss) and SCOMNET (-6.4% loss) amid weakening technical outlook.

Source: Hong Leong Investment Bank Research - 20 Apr 2022