MARKET REVIEW

Global. Ahead of the key US Apr CPI data, Asian markets ended mixed as investors weighed the higher-than-expected China Apr CPI and positive Covid-19 developments as Shanghai and Beijing reported fewer new infections. The Dow plunged 327 pts to a fresh low YTD at 31,834 (-13.9% from all-time high 36,952) whilst the Nasdaq dived 373 pts to 11,364 (-29.9% from all-time high 16,212) after stronger-than-expected Apr CPI reading may force the Fed to hike rates quicker, tipping the economy into a recession. Meanwhile, Brent prices surged 4.8% to USD107.4, buoyed by supply concerns as flows of Russian gas to Europe fell and the EU worked on gaining support for a Russian oil embargo.

Malaysia. KLCI eked out a 1.4-pt marginal gain at 1,555.9 after moving in a tight 1,552.9- 1,559.5 range, led by banking (following a surprise 0.25% hike in OPR) and plantation stocks (July FCPO rallied RM148 to RM6,461 on expectations of higher demand amid Indonesia’s ongoing ban on exports) stocks. Market breadth was neutral with 443 gainers vs 440 losers. Local institutions (-RM41m, YTD:-RM7.93bn) and foreigners (-RM2m, YTD: +RM7.12bn) were the major sellers whilst retailers logged net inflows for a 5th consecutive day (+RM43m, YTD: +RM820m).

TECHNICAL OUTLOOK: KLCI

Following a bruising 51.2-pt rout from 6-9 May, KLCI recorded its 2nd day of rebound to end +1.4 pts to 1,555.9. We reiterate that an extended consolidation is here to stay, with key supports pegged at 1,520-1,530-1,548 levels. 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, hawkish Fed, BNM’s rates normalisation (HLIB expects +0.5% OPR hikes in

2H22 to 2.5% by end-2022), China lockdowns, Russia-Ukraine war and their interactions with economic growth and corporate earnings. Ahead of 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 - 12 May 2022