MARKET REVIEW

Global. The MSCI All Countries Asia Pacific index rebounded 1.5% at 164.6, recouping some losses from the previous sessions, boosted by PBOC’s cut in key interest rate to spur growth amid the economic fallout from Covid lockdowns (5Y LPR: -0.15% to 4.45%; 1Y LPR unchanged at 3.7%). Despite early gains after PBOC cut its LPR to support for the country’s beleaguered economy, recessionary concerns loomed, with Wall Street increasingly worried that the Fed’s aggressive tightening efforts to fight inflation could stunt economic and corporate earnings growth, reflected by the pessimistic guidance from Walmart, Target and Ross Stores. In a whipsawed trading last Friday, the Dow inched up 9 pts (after fluctuated within 30,636-31,516) to 31,262 (-15.4% from all-time high 36,952) and the Nasdaq fell 34 pts at 11,355 (a brutally -30% from all-time high 16,212), whilst the US 10Y Treasury yield slipped further by 0.05% to 2.79% amid risk off mood.

Malaysia. Bucking regional markets’ technical rebound, KLCI ended flat after rising as much as 9.1 pts amid the ongoing results season. Market breadth (gainers/losers) turned positive at 1.86 from 0.29 previously but trading valued fell 10.8% to RM1.99bn. In terms of fund flows, foreign institutions (+RM58m, YTD: +RM7.0bn) and local retailers (+RM6m, YTD: +RM950m) turned net buyers whilst local institutions (-RM63m, YTD: -RM7.96bn) emerged as net sellers for a 2nd day.

TECHNICAL OUTLOOK: KLCI

Last Friday, KLCI surrendered an early 9.1 pts gain to end flat at 1549.1 (+4.7 pts WoW). In the near term, KLCI may continue to trend sideways with key support 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

Investors are facing most chaotic times and bouts of market volatility, in light of (i) the peak of the Malaysia’s 1Q22 results season; (ii) punitive inflation, (iii) hawkish Fed, (iv) rising geopolitical tensions in Europe (precipitated by Russia-Ukraine war, and Finland and Sweden both announcing their bids to join NATO), and (v) BNM’s rates normalisation (towards 2.5% by end 2022). Hence, the local bourse will remain choppy with key supports pegged at 1,500-1,509-1,538 zones whilst resistances are 1,552-1,565-1,580. We continue to approach these dynamics by staying defensive, diversified and patient.

Source: Hong Leong Investment Bank Research - 23 May 2022