MARKET REVIEW

Global. Shrugging off an overnight Wall St rally, Asian markets ended mixed, as sentiment was dampened by a tepid China’s April PMI services data (36.2, Mar: 42) and lingering worries over global growth as elevated inflation could prompt further rate hikes by global central banks to rein in inflation. Ahead of the crucial April’s non-farm payrolls tonight, Wall St experienced a stunning reversal, negating the post-FOMC meeting relief rally on 4 May (+0.5% hike to 0.75-1.00% and a quantitative tightening in June) while countering fears of super-sized hikes. The Dow dived 1,063 pts at 32,998 (-10.7% from all-time high 36,952) whilst the Nasdaq plummeted 647 pts at 12,317 (-24% from all-time high 16,212), unsettled by weak economic reports from the US (1Q22 non-farm productivity), Germany (March factory orders) and China (March PMI services), coupled with heightened fears that the Fed’s tightening campaign could arrest skyrocketing inflation with the prospect of recession.

Malaysia. In a topsy-turvy pattern (fluctuating within 1,576.8-1,615.2 range), KLCI tumbled 17.5 pts to 1,583, surrendering early gains of 14.7 pts, triggered by foreign-led exodus (amid expectations of narrowing OPR and the Fed rates spread that BNM may not follow the Fed’s aggressive monetary stance (consensus OPR: +0.25% in 4Q22 at 2%) as local economic recovery is more measured and inflationary pressures are more muted (vs the US). Domestic institutions (+RM72m, YTD:-RM7.73bn) and retailers (+RM71m, YTD: +RM591m) were the major net buyers whilst foreigners net sold RM143m (YTD: +RM7.14bn) shares, the largest since the -RM153m on 14 Dec 2021.

TECHNICAL OUTLOOK: KLCI

We expect an extended range bound consolidation mode unless the KLCI can break the LT downtrend line hurdles at 1608 (from a 2Y high 1,696). Only a successful breakout would lift the KLCI to 1,620 (YTD high), 1,632 (250W MA) and 1,642 (16M high). On the downside, any decisive fall below the 1,582 (uptrend line from 1,475) support could trigger another round of selldown towards 1,550 (200D MA) and 1,562 (100D MA) levels.

MARKET OUTLOOK

Tracking the dramatic Wall St rout overnight and the 1st heavy selling spree by foreign institutions (the largest since 14 Dec 2021), further KLCI breakdown below 1582 support (uptrend line from 1,475) may trigger selldown towards 1,550-1,562 levels (key barriers: 1,600-1,620). Against a challenging external macroeconomic backdrops and a seasonally poor May reporting season (average 20Y KLCI return: -0.6%), we reiterate a risk-off mode.

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of the market uncertainty, we decided to square off SIMEPROP (0.9% return), ARMADA (6% return), EVERGRN (19.2% return), FLBHD (18.8% return), HOMERIZ (7.4% return), PHARMA (2.6% loss) and CTOS (3.2% loss) on 5 May.

Source: Hong Leong Investment Bank Research - 6 May 2022