MARKET REVIEW

Global. Asian markets ended mixed amid a challenging market environment marred by rising interest rates, surging inflation and global growth concerns, as well as the curbs and endless mass testing imposed in Beijing. Following a 3,601-pt rout in the last 8 weeks, the Dow rebounded 618 points at 31,880 in a broad-based relief rally while the US 10Y Treasury yields jumped 0.08% to 2.86% as investors welcomed reports that Biden may reduce tariffs on some goods imported from China. Still, sentiment remained wary as market participants await Powell's speech scheduled tonight and the FOMC minutes on Wednesday for clues on the central bank’s rate-hike path.

Malaysia. Led by a selloff in plantation stocks, KLCI closed -6.6 pts at 1,542.5 to record its 3rd straight decline as investors weighed on the peak of the May results season and sporadic selloff by foreign institutions in May after recording a net inflow of RM7.3bn during Jan-April. Market breadth (gainers/losers) turned negative at 0.65 from 1.86 last Friday. In terms of fund flows, foreign (-RM36m, YTD: +RM6.97bn) and local institutions (-RM11m, YTD: -RM7.97bn) joined as net sellers while retailers (+RM47m, YTD: +RM997m) emerged as net buyers for a 2nd day.

TECHNICAL OUTLOOK: KLCI

KLCI lost 6.6 pts at 1,542.5 to record its 3rd straight decline. Following the breakdown below 200D MA at 1,552 and weak technical indicators, the index may continue to drift sideways with key support at 1509-1530-1538 levels. Topside, immediate resistances are situated at 1552 (200D MA), 1,565 (38.2% FR) and 1580 (uptrend line from 1475)

MARKET OUTLOOK

In the midst of the ongoing peak 1Q22 results season until 31 May, the local bourse is likely to stay volatile (supports: 1,500-1,509-1,538; resistances are 1,552-1,565-1,580), as investors reassess a confluence of risks: (i) punitive inflation, (ii) hawkish Fed, (iii) rising geopolitical tensions in Europe (precipitated by Russia-Ukraine war with more countries are set to join NATO) and Asia (Biden’s current trip to Asia in order to shore up supports from allies in confronting China), (iv) climate change and food crisis, and (v) BNM’s rates normalisation (towards 2.5% by end 2022). Hence, We continue to approach these dynamics by staying defensive, diversified and patient.

Source: Hong Leong Investment Bank Research - 24 May 2022