MARKET REVIEW

Global. Asian market ended lower as investors kept an eye on higher-than-expected inflation prints from the US and China, the MSCI semi-annual index review, and lingering concerns over aggressive tightening monetary policies to global growth. In a topsy-turvy session, the Dow slipped 104 pts (after diving as much as 606 pts) at 31,730 (-14.1% from all-time high 36,952) whilst the Nasdaq inched up 7 pts (from -256 pts) to 11,731 (-27.6% from all-time high 16,212), as investors continued to assess the implications of the Fed’s hawkish stance on the economy following the elevated April's CPI and PPI reports. On the other hand, the US 10Y Treasury yield fell 0.07% to 2.85% (from recent peak of 3.2%) as investors rushed into safe-haven assets, thanks to the concerns that an aggressive tightening from central banks to rein on record inflation could hurt economic growth.

Malaysia. Tracking the bearish ASEAN bourses and a resumption of foreign selling, KLCI plunged 17.1 pts at 1,538.8, led by selloff in PMETAL, IOICORP, SIMEPLT, DIGI, KLK and PETDAG as markets continued to digest the surprise OPR hike and potential further rate hikes in 2H. Market breadth was bearish with 874 losers vs 209 gainer. Local institutions (+RM41m, YTD:-RM7.89bn) and retailers (+RM104m, YTD: +RM824m) foreigners (- RM145m, YTD: +RM6.97bn) resumed selling for a 2nd day.

TECHNICAL OUTLOOK: KLCI

After a mild rebound on 10-11 May, KLCI resumed its brutal selldown yesterday (-17.1 pts to 1,538.8) and violated the key 200D MA support near 1,551. Following the bearish breakdown, the benchmark may retest lower supports near 1,515 -1,530 before staging an oversold rebound. On the upside, heavy resistances are seen at 1,551-1,565-1,586 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 high inflation, 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. Nevertheless, KLCI is grossly oversold following the recent 76 pts slide from 1M high at 1,615. Further fall is likely to be cushioned near 1,500-1,515-1,530 zones underpinned by (i) Malaysia’s relative appeal amid the geopolitical conflict, (ii) sustained transition to endemicity and (iii) possibility of an early GE15 this year in 2H.

VIRTUAL PORTFOLIO POSITION-FIG1

We squared off HIAPTEK (7% loss) yesterday amid expiry.

Source: Hong Leong Investment Bank Research - 13 May 2022