MARKET REVIEW Global. Ahead of key US May CPI data, MSCI AC Asia Pacific index fell 0.7% to 168.2 as sentiment was dampened by OECD’s grim global growth outlook and renewed curbs in some parts of Shanghai to quell a rise in new cases just days after a two-month lockdown. Prior to the highly-anticipated US May CPI (consensus: 8.2%, April: 8.3%) data tonight, the Dow skidded 638 pts or 1.94% to 32,273 whilst the Nasdaq dived 332 pts or 2.79% at 11,754, in light of the heightened worries about Fed’s aggressive policy tightening, sliding global economic growth coupled with signs of lower consumer spending. Meanwhile, ECB is looking to raise rate by 0.25% and halt its asset purchases from 1 July, also a bigger hike of 0.5% could take place in Sept should the inflation outlook deteriorate.

Malaysia. Tracking lower regional markets and 5 days of consecutive foreign net outflows, KLCI tumbled 14.2 pts to 1,509.7, making it a 6-day losing streak, led by selloff in PCHEM, IHH, SIMEPLT, MAXIS, TENAGA and GENTING. Market breadth (gainers/losers) worsened to 0.52 from 0.74 a day before. Foreign institutions intensified their net selling to RM189m (YTD: +RM7.14bn), being the highest since 6 May whilst local institutions (+RM129m, YTD: -RM8.21bn) and retailers (+RM60m, YTD: +RM1.06bn) were the major net buyers.

TECHNICAL OUTLOOK: KLCI

KLCI slid 14.2 pts to 1,509.7 for a 6th consecutive day of decline. Following the Wall St rut overnight and a resumption of foreign selling, KLCI could be heading for a rocky path ahead. A breakdown below 1,500 may trigger further selloff towards 1,475-1,485 zones before staging a technical rebound. Any technical rebound may be capped near 1517- 1,531-1,554 levels.

MARKET OUTLOOK

Tracking an overnight rout from Wall St ahead of the widely watched US May CPI data tonight, Bursa Malaysia is likely to stay choppy, with key downside supports at 1,500, followed by 1,475-1,485 levels. Meanwhile, any technical rebound may be capped near 1517-1,531-1,554 levels due to prevalent uncertainties, in the light of (i) elevated inflation, (ii) hawkish Fed, (iii) protracted Russia-Ukraine war, (iv) renewed political fluidity amid speculation of GE15 in 2H22, and (v) a resumption of foreign selling. We continue to approach these dynamics by staying defensive, diversified and patient.

Source: Hong Leong Investment Bank Research - 10 Jun 2022