MARKET REVIEW

Global. Asian markets ended mostly lower last Friday, as investors gauged the implications of the Fed’s committed tightening cycle amid elevated inflation, slowing global economy, and the disrupted supply chains from China’s Covid-19 zero-tolerance approach. Last Friday, the Dow narrowed its early 524-pt slide to end -98 pts at 32,899 (-11% from all-time high 36,952), as investors assessed the strong April jobs report. Meanwhile, the US 10Y bond yield rallied 0.09% to 3.13% following a hawkish comment from Richmond Fed President that all options (including a 0.75% hike downplayed by Powell) should remain on the table. In a dramatic week, the Dow fluctuated within 32,450-34,113 levels before closing -78 pts, notching its 6th straight weekly decline, thanks to the May FOMC’s decision for aggressive series of hikes to combat inflation and plans for balance sheet reduction in June, stoking already elevated recession fears and catalysing the wild swings.

Malaysia. Mirroring Wall St rout and a back-to-back exodus by foreign institutions, KLCI slid for a 2nd day to end -18.6 pts at 1,564.3 (-36.1 pts WoW). Market breadth (gainers/losers) deteriorated to 0.36 from 0.61 in the prior session. Domestic institutions (+RM91m, YTD:-RM7.65bn) and retailers (+RM132m, YTD: +RM591m) emerged as the major net buyers whilst foreigners net sold RM223m (YTD: +RM6.92bn) shares, the largest since the -RM263m on 1 Dec 2021.

TECHNICAL OUTLOOK: KLCI

Following the formation of a two-day bearish engulfing and long black candlesticks coupled with the key uptrend line support breakdown (near 1,580), KLCI’s short term outlook has become increasingly negative. A sharp fall below 200D MA support at 1,550 may trigger further slide towards 1,520-1,530 levels. Key resistances are situated at 1,580-1,600 zones.

MARKET OUTLOOK

Against an extraordinarily challenging and uncertain times, concerns of further net outflows by foreigners, and a historically tepid May reporting season (average 20Y KLCI return: - 0.6%), Bursa Malaysia is expected to suffer an extended volatility as investors are increasingly worry over surging interest rates’ adverse impact on corporate earnings and economic growth. A breakdown below immediate support at 1,550 (200D MA) would exert further correction towards 1,520 and 1,530 levels, while stiff resistances are pegged at 1,580 and 1600 zones.

Source: Hong Leong Investment Bank Research - 9 May 2022