MARKET REVIEW

Global. MSCI All Countries Asia Pacific Index soared 1.68% to 166, helped by a lack of hawkish surprises from the May FOMC minutes and upbeat guidance from US retailers, as well as positive earnings from Alibaba and Baidu, overshadowing the weakening profitability of China’s industrial sector in April due to Covid lockdowns. Ahead of the Memorial Holiday on 30 May, the Dow rallied 576 pts to 33,213 for a 6th straight gain (+6.24% WoW, 1st weekly gain in 9 weeks) and the Nasdaq surged 390 pts at 12,313 for a 3rd day hike (+8.4% WoW, 1st weekly gain in 8 weeks), lifted by resilient consumer spending (beat consensus in April). Also, the closely watched core PCE inflation rate eased further, bolstering expectations that the Fed may not embark on more aggressive rate hikes.

Malaysia. Led by a 3rd day of net foreign investors’ inflows, KLCI staged a further rebound at the eleventh hour to finish +5.6 pts at 1,546.8, supported by selected heavyweights i.e. IHH, PMETAL, PBBANK, TM, CIMB, MAYBANK and PBB. Market breadth, on the other hand, remained negative but improved to 0.75 from 0.73 previously. Foreign institutions (+RM71m, YTD: +RM6.92bn) and retailers (+RM7m, YTD: +RM1.09bn) emerged as net buyers while local institutions net sold RM78m (YTD: -RM8.01bn) shares.

TECHNICAL OUTLOOK: KLCI

After skidding 114 pts from 1,615 (5 May high) to a low of 1,530 (24 May low), KLCI extended its winning streak for a 3rd session at 1,546.8 (-2.3 pts WoW). We may witness further oversold rebound this week to retest the key 1,553 or 200D MA hurdle, supported by the Tweezers bottom pattern and bottoming up indicators. A successful breakout may lift KLCI towards 1,565 (38.2% FR) and 1585 (23.6% FR) levels. On the downside, key supports are situated at 1,530 (61.8% FR), 1,516 (lower BB) levels and 1,509 (76.4% FR).

MARKET OUTLOOK

After a relentless selldown from 1,615 in early May to a low at 1530 last week, KLCI seems to have found some footing after notching a 3-day winning streak. In the light of a relief rally on Wall St and bottoming out KLCI technical, a further rebound is on the cards (weekly resistances: 1,553-1,565; supports: 1,520-1,530), with the 1Q22 results season is approaching to the tail-end. However, lingering risks over (i) elevated inflation, (ii) hawkish Fed, (iii) geopolitical tensions in Europe and Asia, and (iv) global economic slowdown may cap upside near 1,586-1,600 hurdles and discourage firmer investors’ participation.

Source: Hong Leong Investment Bank Research - 30 May 2022