MARKET REVIEW

Global. Asian markets ended mixed as early gains driven by overnight Wall St rally dissipated after PBOC defied market expectations by keeping its lending rate unchanged. Sentiment was also damped by the IMF’s warning of more market sell-offs as central banks try to combat elevated inflation and ease back on pandemic stimulus measures. Overnight, Nasdaq plunged 166 pts to 13,453 amid a sluggish results by Netflix (-35% at USD226) after reporting a first subscriber loss in more than 10 years. Meanwhile, the Dow jumped 249 pts to 35,160 on the back of strong earnings from P&G and IBM, as well as responded positively to recent dovish comments from two Fed officials i.e. Charles Evans and Raphael Bostic on interest rate rises.

Malaysia. Tracking overnight Dow rally and a resumption of foreigners’ net inflow, KLCI rallied 12.6 pts to close at 1,593.7, snapping a 3-day losing streak amid strong buying interest from heavyweight counters such as MAYBANK, SIMEPLT, KLK and PETDAG. Market breadth turned positive as 573 gainers outpaced 386 losers, with trading value surging 65% to RM2.60bn. Foreigners (+RM97m, YTD: +RM6.93bn) turned into net buyers whilst local institutions (-RM55m, YTD:-RM7.33bn) and retailers (-RM43m, YTD: +RM395m) emerged as net sellers.

TECHNICAL OUTLOOK: KLCI

Despite the recent pullback from a high of 1,613.5 to a low of 1,581.5, KLCI managed to stage a timely rebound yesterday to close a tad above the 50D MA and the uptrend line supports (from 1,475 low). The strong close coupled with another overnight Dow’s rebound may lift the benchmark to retest the major 1,600-1,620 barriers next. On the downside, any decisive selloff below the 1,575 (uptrend line support) could trigger another round of selldown towards 1,550-1,560 levels.

MARKET OUTLOOK

As sentiment continues to be grappled by (i) the 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 adopt a risk-off mode, and KLCI is expected to remain choppy (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.

Source: Hong Leong Investment Bank Research - 21 Apr 2022