MARKET REVIEW

Global. Tracking Wall St slump overnight, most Asian markets ended lower, led by losses in commodities and technology stocks as worries about higher interest rates and their impact on economic growth dented risk appetite. Meanwhile, SHCOMP bucked regional markets’ slide to end 1.06% higher after PBoC vowed to make full use of its monetary policy tools to support the economy amid a Covid-induced slowdown. Ahead of the key Apr CPI print tonight, Dow seesawed between gains (+507 pts) and losses (-358 pts) before ending -85 pts at 32,160 whilst the Nasdaq staged a 114-pt rebound after sliding 521 pts previously. Overall, investors remain concerned that the Fed’s swift path of policy tightening could inadvertently push the US economy into a recession. Separately, Cleveland Fed President said a 0.5% hike is on the table during the June-July policy meetings while an even larger 0.75% hike may not be ruled out in perpetuity.

Malaysia. Led by the return of foreign net inflows, KLCI staged a 5.4-pt technical rebound after sliding 51.2 pts in three days on bargain hunting activities in selected banking and telco stocks. Despite the headline gains, market breadth (gainers/losers) remained negative at 0.52 vs 0.22 on 9 May. After net sold RM366m equities in a holiday-shortened week, foreigners increased its purchases for a 2nd day (+RM179m, YTD: +RM7.12bn) whilst retailers logged net inflows for a 4th consecutive day (+RM21m, YTD: +RM777m). After net buying RM185m shares in three days, local institutions resumed selling for a 2nd day, logging a net outflow of RM201m (YTD:-RM7.89bn).

TECHNICAL OUTLOOK: KLCI

Following a bruising 3-day 51.2-pt rout, KLCI staged a 5.1-pt technical rebound at 1,554.6, a tad higher above 1,551 (200D MA). An extended consolidation is here to stay, with key supports pegged at 1,520-1,530-1,548. On the upside, a successful breakout above 1,580 (support trendline from 1,475) may spur the index to retest 1,600-1,620 zones.

MARKET OUTLOOK

Against an extraordinarily challenging times and a historically tepid May reporting season (average 20Y KLCI return: -0.6%), Bursa Malaysia is likely stay in an extended consolidation mode amid lingering concerns over uncertainties about inflationary developments, policy responses, China lockdowns, Russia-Ukraine war and their interactions with economic growth and corporate earnings. Ahead of the key OPR decision (11 May), the MSCI semi-annual index review (12 May), and 1Q GDP (13 May) announcements, KLCI is expected to hover near 1,551 zones (200D MA), with lower supports at 1,520-1,530 levels. Upside hurdles are pegged at 1,580, 1,600 and 1,620.

Source: Hong Leong Investment Bank Research - 11 May 2022