MARKET REVIEW

Global. Asian markets ended mixed as traders adopted a wait-and-see stance ahead of FOMC meeting outcome, as well as assessing the impact from the EU to forward new sanctions against the Kremlin which will include a six-month phase out of Russian crude imports. After tumbling 8.57% from April’s high of 35,492 (21 Apr) to a low of 32,450 (2 May), the Dow staged a 2.8% relief rally overnight to 34,061 as investors digested the widely-anticipated 0.5% rate hike and detailed plans to begin reducing its nearly USD9 trillion balance sheet on 1 June as officials work to rein in inflation. Powell noted that additional 0.50% rate hikes remain an option “for the next couple of meetings,” but pacified speculation of an even more aggressive 0.75% hike. Meanwhile, another slew of upbeat earnings from AMD and Starbucks also boosted sentiment.

Malaysia. Tracking a relief rally from Wall St, KLCI inched up 3.1 pts to 1,600.4 on 29 Apr (-1.5 pts WoW) ahead of the long Workers’ day and Raya holidays, boosted by further relaxation of SOP effective 1 May to revive the economy and continued buying supports in selected heavyweight counters such as gaming, O&G, as well as plantation stocks. Market breadth stayed positive as 566 gainers vs 390 losers. Local institutions (+RM22m, YTD:- RM7.81bn) and foreigners (+RM2m, YTD: +RM7.29bn) emerged as major net buyers whilst retailers (-RM24m, YTD: +RM520m) were net sellers.

TECHNICAL OUTLOOK: KLCI

KLCI is likely to be stuck in an extended range bound consolidation mode unless it can break the LT downtrend line hurdles near 1609 (from a 2Y high 1,696). A successful breakout would lift the index towards 1,620 (YTD high), 1,632 (250W MA) and 1,642 (16M high). On the downside, any decisive fall below the immediate support of 1,582 (uptrend line from 1,475) could trigger another round of selldown towards 1,550-1,565 levels.

MARKET OUTLOOK

Mirroring overnight rally in Wall St, KLCI may advance further today to break the long awaited downtrend line resistance near 1,608. A successful breakout would lift the index towards 1,620 (YTD high). Nevertheless, against a challenging external macroeconomic backdrops, we reckon investors may continue to adopt a risk-off mode, with formidable resistance levels cap at 1,632 (250W MA) to 1,642 (16M high) as we are now entering into a the historically volatile May reporting season, reflected by the average benchmark returns of -0.5% (10Y) and -0.6% (20Y). Key supports are pegged at 1,565-1,582 zones.

Source: Hong Leong Investment Bank Research - 5 May 2022