MARKET REVIEW

Global. Tracking Wall Street’s rally last Friday, Asian markets closed mostly higher as China eased some of its strict COVID curbs in Shanghai and Beijing, lifting hopes for the world's number two economy. Likewise, a moderation in the US core PCE index (Apr: +4.9% YoY vs March: +5.2%) has tapered the inflation fear of a more aggressive Fed’s monetary policy. Overnight, the US market was closed yesterday due to the Memorial Holiday. Overall, the Dow rallied +1716 pts (or +6.24%) WoW to 33,213, marking the first weekly gain after an 8-week loss. On the other hand, Nasdaq rallied 735 pts (or +8.4%) WoW at 12,313 after suffering a 9-week loss, boosted by a lack of hawkish surprises from the May FOMC minutes, as well as a steeply oversold technical indicators. Key events to look out for this week are the US ISM manufacturing index (1 June), unemployment rate (3 June) and US ISM Services PMI (3 June).

Malaysia. Bucking the regional market, KLCI ended 3.7 pts lower at 1543 yesterday, dragged by the glove and plantation heavyweight. Market breadth remained negative but with G/L ratio improved to 0.82 from 0.75 last Friday. Foreign institutions were the major net buyers for the 4th straight session (+RM122m, YTD: +RM7.04n) while local retailers (- RM19m, YTD: +RM1.07bn) and local institutions (-RM103m, YTD: -RM8.11bn) emerged as the net sellers in equities

TECHNICAL OUTLOOK: KLCI

Barring any major breakdown below the 1531 long-term support, we may witness further oversold rebound this week to retest the key 1,553 or 200D MA hurdle, supported by the impending golden cross in MACD indicators together with an oversold RSI. A successful breakout above 1,553 may lift KLCI towards 1,565 (38.2% FR) and 1585 (23.6% FR) levels. On the flip side, failure to do so would witness the index trending sideways, oscillating near supports at 1,531 (61.8% FR), 1,516 (lower BB) levels.

MARKET OUTLOOK

As the local 1Q22 results season draws to the close, a further rebound is on the cards (weekly resistances: 1,553-1,565; supports: 1,516-1,530), supported by easing US core inflation data, gradual uplifting in China’s COVID lockdowns, and a resilient US consumer spending and relatively strong corporate earnings. However, in the absence of meaningful fresh catalysts in the near term, lingering risks over (i) elevated inflation, (ii) hawkish Fed, (iii) geopolitical tensions in Europe and Asia, and (iv) global economic slowdown will continue to discourage investors’ participation, reflected by lackluster trading value.

Source: Hong Leong Investment Bank Research - 31 May 2022