MARKET REVIEW

Global. Despite overnight rebound from Wall St and Shanghai’s plans to gradually reopen its economy, Asian markets ended mixed as investors mulled the hawkish rhetoric by Powell, China’s bruising economy amid recent strict Covid-19 lockdowns, skyrocketing inflation and the prospect of a global economic slowdown. After staging a 3-day 925-pt relief rally, the Dow nose-dived 1,164 pts or 3.57% at 31,490 (-14.8% from all-time high 36,952) whilst the 10Y US Treasury yield slid 0.10% to 2.88% amid risk off mood following sluggish corporate earnings from key retailers such as Target, Lowe’s and Walmart. Sentiment was also dampened by tech slump (Nasdaq: -566 pts at 11,928; -26.4% from all time high 16,212) rising recession fears and hawkish remarks from Powell on 17 May for a series of 0.50% rate hikes in the coming months, and also stated that the Fed “won’t hesitate” to tighten policy into restrictive territory to tame inflation.

Malaysia. Mirroring higher ASEAN markets, KLCI ended +6.3pts to 1,554.9, recording its 3rd day of oversold rebound, lifted by on selected buying interests in PBBANK, HLBANK, PPB, MAYBANK, MRDIY and GENTING. In terms of fund flows, local institutions were net buyers (+RM13m, YTD:-RM7.87bn) for a 2nd day whilst foreigners (-RM11m, YTD: +RM6.93bn) and retailers (-RM3m, YTD: +RM952m) emerged as net sellers.

TECHNICAL OUTLOOK: KLCI

After tumbling 77 pts from a high of 1,615 (5 May) to a low of 1,538 (12 May), KLCI closed higher for a 3rd session (+6.3 pts to 1,555), a tad above the 200D MA near 1,552. In the near term, KLCI may continue to build a base near 1,538-1,552 zones before advancing to 1,565 (38.2% FR), 1,576 (20D MA), and 1,586 (23.6% FR) levels. On the contrary, a decisive fall below 1,538 may trigger further selldown towards 1,510-1,530 territory.

MARKET OUTLOOK

Despite easing lockdowns in Shanghai and further relaxations on a year-long clampdown on technology giants, the overnight rout on Wall Street should spillover to the local market, as investors are expected to adopt a risk-off mode due to precarious headwinds for global GDP growth and corporate earnings expectations, grappled by (i) punitive inflation, (ii) hawkish Fed, (iii) rising geopolitical tensions in Europe (precipitated by Russia-Ukraine war, and Finland and Sweden both announcing their bids to join the NATO), and (iv) BNM’s rates normalisation (towards 2.5% by end 2022). Key supports are situated at 1,500-1,509- 1,538 zones whilst resistances are pegged at 1,565-1,576-1,586.

Source: Hong Leong Investment Bank Research - 19 May 2022