MARKET REVIEW

Global. Ahead of the Fed’s Beige Book release (1 June) and the non-farm payrolls data (3 June), Asian markets ended flat as investors cheered news of Shanghai’s imminent reopening and easing Covid restrictions throughout the country, as well as smaller decline in the official manufacturing PMI for China to 49.6 in May from April's 26-month low of 47.4. Wall St ended lower as investors fretted over the implications of soaring inflation and tighter monetary policy on economic growth, following Fed Governor Christopher Waller’s hawkish remark that the Fed should be prepared to hike interest rates by a 0.5% at every meeting until there is clear and convincing evidence that inflation is dropping. The Dow slid 222 pts at 32,990 (+0.04% in May) while the Nasdaq fell 50 pts at 12,081 (-2.1% in May).

Malaysia. On the back of the semi-annual review on 31 May, Bursa Malaysia ended the last day in May on a buoyant mood as the KLCI rallied 27.1 pts at the eleventh hour to 1,570.3 (-1.9% MoM), driven mainly by foreigners’ net buying amounting to RM321m (the highest daily value since RM314m on 18 June 2021). Market breadth turned positive with G/L ratio improved to 1.35 after hovering below 1 in the last six sessions. Foreign institutions were the net buyers for the 5th straight session (+RM321m, YTD: +RM7.37n) while local retailers (-RM37m, YTD: +RM1.03bn) and local institutions (-RM284m, YTD: - RM8.39bn) emerged as the net sellers in equities.

TECHNICAL OUTLOOK: KLCI

Following the major breakout above 1,553 (200D MA) and 1,565 (61.8% FR) yesterday to close at 1,570, the bullish technical indicators may lift KLCI to retest 1,578-1,585-1,600 in the short term. On the flip side, a strong profit taking pullback below 1,553-1,565 zones may trigger further consolidation within the 1,520-1,530 territory.

MARKET OUTLOOK

As the local 1Q22 results season has drawn to the close yesterday, a further technical rebound is on the cards following the bullish breakout (resistances: 1,585-1,600; supports: 1,530-1,553), supported by easing US core inflation data, gradual uplifting in China’s COVID lockdowns, resilient US consumer spending and persistent foreign net inflows (May: +RM78m, YTD: +RM7.37bn). However, in the absence of 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.

VIRTUAL PORTFOLIO POSITION-FIG1

Yesterday, we squared off BIMB (0.7% return), MAYBANK (2.4% return) and AFFIN (5.3% return) due to expiry (exceeded the maximum 4-5 weeks holding period).

Source: Hong Leong Investment Bank Research - 1 Jun 2022