MARKET REVIEW

Global. Asian markets were in a sea of red following an overnight slide from Wall St amid heightened concern that elevated inflation is starting to bite into global GDP growth and corporate earnings expectations, with Fed officials reaffirmed more restrictive monetary policy lies ahead. The Dow extended its selloff for a 2nd day albeit in a smaller magnitude (- 237pts to 31253; -15.4% from all-time high 36,952) whilst the 10Y US Treasury yield slipped 0.05% to 2.84% amid risk off mood as investors fretted over the implications of soaring inflation and tighter monetary policy on the growth momentum. Meanwhile, poor guidance from Cisco Systems and weak economic data from the Philadelphia Fed Business Outlook, the leading index of economic indicators and existing home sales further dampened sentiment.

Malaysia. Tracking Wall St and regional markets’ slump, KLCI fell as much as 9.9 pts before reducing its losses to 5.5 pts, snapping its 3-day winning streak. Market breadth (gainers/losers) fell to 0.29 from 0.99 previously. In terms of fund flows, foreign institutions turned net buyers (+RM31m, YTD: +RM6.95bn) after net selling RM63m in two days whilst local institutions (-RM26m, YTD: -RM7.89bn) and retailers (-RM5m, YTD: +RM944m) emerged as net sellers.

TECHNICAL OUTLOOK: KLCI

After rising 16.1 pts in three days, KLCI gave back 5.5 pts to 1549.4 in tandem with Wall St rout overnight. In the near term, KLCI may continue to trend sideways with key support at at 1509-1530-1538. Topside, immediate resistances are situated at 1552 (200D MA), 1,565 (38.2% FR) and 1580 (uptrend line from 1475).

MARKET OUTLOOK

We expect the extended Wall St selloff should spillover to the local market today, 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 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 1,565-1,580-1,586.

Source: Hong Leong Investment Bank Research - 20 May 2022