MARKET REVIEW Global. The MSCI All Countries Asia Pacific Index jumped 1.6% to 163, as investors cheered news that Shanghai plans to gradually reopen its economy after spending more than six weeks in lockdown, outweighing a challenging market environment marked by rising interest rates, high inflation and the prospect of a global economic slowdown. After plummeting 4,621 pts from a high of 35,492 (21 Apr) to a low of 31,231 (12 May), the Dow recorded a 3rd straight day of technical rebound, rallying 431 pts to 32,655. Sentiment was lifted by solid April retail sales and factory production data despite Powell’s rhetoric on rate hikes to control inflation.

Malaysia. Mirroring higher regional markets, KLCI ended +4.2pts to 1,548.6, after plunging from a high of 1,615 (5 May) to a low of 1,538 (12 May) on selected buying interests in PMETAL, SIMEPLT, MISC, TENAGA and IOICORP. In terms of fund flows, local institutions were net buyers (+RM58m, YTD:-RM7.88bn) after disposing RM292m shares last week whilst foreigners (-RM52m, YTD: +RM6.93bn) and retailers (-RM6m, YTD: +RM952m) emerged as net sellers after logging +RM57m and +RM235m shares last week.

TECHNICAL OUTLOOK: KLCI

After tumbling 77 pts from a high of 1,615 (5 May) to a low of 1,538 (12 May), KLCI ended higher for a 2nd session (+4.2 pts to 1,548) yesterday. As technical indicators are on the mend, we may see further oversold rebound this week to retest 1,551 (200D MA) and 1,565 (38.2% FR) levels, with stiffer hurdles situated at 1,586 (23.6% FR) and 1,600 levels. On the downside, key supports lie at 1,530-1,509-1,500 zones.

MARKET OUTLOOK

Wall St’s overnight rally and China’s plans to reopen Shanghai’s economy in stages coupled with relaxation on a year-long clampdown on technology giants bode well for further technical rebound this week. Nevertheless, against a historically tepid May reporting season (average 20Y KLCI return: -0.6%), Bursa Malaysia is likely stay in consolidation mode amid lingering concerns over uncertainties about elevated, hawkish Fed, rising geopolitical tensions in Europe (precipitated by Russia-Ukraine war, and Finland and Sweden both announcing their bids to join the NATO) and BNM’s rates normalisation (towards 2.5% by end 2022). Key resistances are situated at 1,551-1,565-1,586 zones whilst supports are near 1,500-1,509-1,530 zones.

Source: Hong Leong Investment Bank Research - 18 May 2022