MARKET REVIEW Global. Despite the relaxation of Covid-19 restrictions and signs of regulatory easing in China, Asian markets ended lower due to lingering worries of global central banks’ aggressive tightening to combat inflation may stifle growth as the Reserve Bank of Australia hiked its benchmark rate by a larger-than-expected 0.50% to 0.85%. Meanwhile, the ECB on Thursday is set to end trillions of euros of asset purchases and cement a path to exiting eight years of negative interest rates. The Dow tumbled as much as 274 pts in early trades on profit warning from Target (2nd time in three weeks) and a sombre assessment from the World Bank as it slashed global growth forecast to 2.9% for 2022 from 4.1% in Jan (2023- 2024f: +3%) and warned that the world economy could slip into a period of stagflation reminiscent of the 1970s. However, the benchmark ended 264 pts higher to 33,180 on dip buying ahead of Friday’s update on US CPI and 14-15 June FOMC meeting.

Malaysia. Tracking lower regional markets and a 3rd day of foreign net outflows, KLCI lost 11.9 pts at 1,525.9 to register its 4th day of decline amid selloff in selected heavyweights i.e. PMETAL, SIMEPLT, KLK, PCHEM, MAYBANK and PBBANK. Market breadth (gainers/losers) reversed back to negative at 0.62 from 1.35 last Friday. Local retailers emerged as the sole net buyers (+RM44m, YTD: +RM1.0bn) whilst foreign (-RM32m, YTD: +RM7.37bn) and local institutions (-RM12m, YTD: -RM8.38bn) were the major net sellers.

TECHNICAL OUTLOOK: KLCI

KLCI tumbled 11.9 pts at 1,525.9 for a 4th consecutive decline, ending 89 pts from monthly high of 1,615. Following the multiple breakdowns below key supports and weakening technicals, the benchmark may continue to drift lower towards 1,503-1,512 territory before staging a technical rebound. On the upside, stiff hurdles are situated at 1,531-1,554-1,565.

MARKET OUTLOOK

Despite the positive reopening leads from China, Bursa Malaysia is likely to stay in lacklustre and choppy mode ahead of the key US May CPI data (10 June) and 14-15 June FOMC meeting, coupled with the renewed political fluidity as the main parties in the current ruling coalition has already announced earlier that it will not renew the MOU when it expires on 31 July, paving the way for a possible GE15 in 2H22. Crucial supports are pegged at 1,500-1,512-1,520 whilst resistances are situated near 1,531-1,554-1,565 zones.

Source: Hong Leong Investment Bank Research - 8 Jun 2022