MARKET REVIEW

Global. Despite overnight rally in Wall St, Asian markets ended mixed amid selloff in SHCOMP (-2.26%) and HSI (-1.25%), as investors fretted over the economic fallout from the nation’s Covid-Zero strategy, with lower-than-expected policy stimulus adding to their disappointment. Overnight, the Dow turned an initial 332-pt rally into a rout, with the benchmark finishing -360 pts at 34,792, as the initial enthusiasm over upbeat earnings faded following hawkish remarks from Powell (signalled that the Fed is committed to taming inflation by raising a 0.5% hike on 3-4 May meeting) spooked investors. On the corporate side, Tesla jumped over 3% following the electric-car maker's upbeat earnings report, while United Airlines added 9% after the company forecasted a profit in 2022.

Malaysia. Tracking gains in most ASEAN markets, KLCI gained 4.6 pts at 1,598.3, led by buying interests in MAYBANK, CIMB, PCHEM TM, HLBANK and PBBANK. Market breadth was positive as 518 gainers outpaced 445 losers. Foreigners (+RM50m, YTD: +RM6.98bn) turned into net buyers for a 2nd day whilst local institutions (-RM48m, YTD:-RM7.37bn) and retailers (-RM2m, YTD: +RM392m) emerged as net sellers.

TECHNICAL OUTLOOK: KLCI

After the pullback from a high of 1,613.5 to a low of 1,581.5, KLCI staged a timely rebound for a 2nd day to 1,598.3. The close above 20/50/30D MAs and uptrend line support (from 1,475 low) may lift the index higher towards 1,600-1,610-1,620 hurdles. On the downside, any decisive fall below the 1,575 (uptrend line support) could trigger another round of selldown towards 1,550-1,560 levels.

MARKET OUTLOOK

The overnight rout on Wall Street should spillover to the local market, as investors are expected to adopt a risk-off mode (supports: 1,547-1,561-1,575; resistances: 1,600-1,620), 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) precarious headwinds for global GDP growth and corporate earnings expectations 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 - 22 Apr 2022