MARKET REVIEW

Global. MSCI All Countries Asia Pacific Index tumbled 1.8% to 161.2 amid lingering concerns over hawkish Fed and the prolonged lockdown in Shanghai, deepening investors' fears that the global economy is headed for a rapid slowdown. Meanwhile, speculation that Putin might declare an outright war on Ukraine (from a special military operation) ahead of his speech at "Victory Day" celebrations on 9 May also hurt sentiment. The Dow tanked 2% at 32,245 (-12.7% from all-time high 36,952) whilst the Nasdaq sank 4.3% (-28.3% from all time high 16,212) ahead of the US April CPI data (11 May) to gauge the Fed’s commitment to pursue multiple 0.5% hikes to combat stubborn inflation and avert a hard landing in US economy. Adding to the sombre mood were signs of fallout in China amid tight lockdowns.

Malaysia. Mirroring Wall St and regional markets slump, KLCI slid 15.2 pts at 1,549.2 (-71 pts from YTD high of 1620), notching its 3rd straight day of decline. Market breadth (gainers/losers) deteriorated further to 0.22 from 0.36 last Friday. After 2-day selloff amounting to RM366m, foreigners nibbled RM15m shares (YTD: +RM6.94bn) whilst retailers net bought RM33m trades (YTD: +RM756m). After net buying RM185m shares in three days, local institutions resumed selling, offloading RM47m trades (YTD:-RM7.69bn).

TECHNICAL OUTLOOK: KLCI

Following a bruising 3-day selloff sing the formation of multiple bearish candlesticks coupled with a decisive breakdown below the uptrend line support (near 1,580), KLCI’s short term outlook has turned increasingly negative. A sharp fall below 200D MA support at 1,551 may trigger further slide towards 1,520-1,530 levels. Key resistances are situated at 1,565-1,580-1,600 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 likely to brace for an extended consolidation as investors are increasingly worry over surging interest rates’ adverse impact on corporate earnings and economic growth. Tracking a persistent rout on Wall St and the violation of 200D MA support (near 1,551) yesterday, KLCI may retrace lower towards 1,520 and 1,530 levels before staging a technical rebound (resistances: 1,565-1,580-1,600), ahead of the key OPR decision (11 May) and 1Q GDP (13 May) announcements.

Source: Hong Leong Investment Bank Research - 10 May 2022