MARKET REVIEW

Global. On the back of an extended rout from Wall St and surging US 10Y bond yield, MSCI AC Asia Pacific index fell 0.97% to 159.89 amid lingering fears over a four decade high US inflation may trigger more aggressive rate hikes at the conclusion of the 14-15 June FOMC meeting. The Dow ended -152 pts to 30,364 (-17.8% from all-time high 36,952) to record its 5th straight decline totalling 2815 pts. Sentiment remained fragile amid heightened worries that aggressive tightening by the Fed could push the US economy into a hard landing, whilst the US 10Y bond yield began pricing in a 0.75% rate hike at the conclusion of the FOMC meeting tomorrow (2am Malaysia time) after rallying 0.11% at 3.47%. Meanwhile, economic data continued to underscore persisting inflation pressures as the May PPI jumped 0.8% in May, in-line with expectations but doubling April’s 0.4% uptick.

Malaysia. After plunging 105.3 pts in the last 8 days, KLCI finally staged a long-awaited technical rebound (+16.5 pts to 1,481.3) despite Dow’s overnight slump. Market breadth (gainers/losers) improved to 1.0 from 0.13 a day before. Together with local retailers (+RM12m, 5D: +RM188m; YTD: +RM1.23bn), foreign institutions emerged as net buyers (+RM9m, 5D: -RM559m; YTD: +RM6.81bn) after net sold RM677m in the last seven days. Meanwhile, local institutions (-RM21m; 5D: +RM258m; YTD: -RM8.04bn) were the only net sellers after net buying RM357m in the last four days.

TECHNICAL OUTLOOK: KLCI

After testing our envisaged rock-bottom support near 1,428-1,452 levels yesterday, KLCI finally staged a 16.5-pt oversold rebound to 1,481. In the wake of an extended Wall St rout pending a crucial FOMC decision tomorrow, KLCI could face some choppy ride today with stiff barriers near 1,500-1,510 levels.

MARKET OUTLOOK

Tracking an extended slump from Wall St ahead of the FOMC’s decision tomorrow (2am Malaysia time), KLCI could experience some choppy ride today (key supports 1,428-1,450; resistances: 1,490-1,500-1,510), in the wake of prevalent headwinds (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 - 15 Jun 2022