MARKET REVIEW

Global. Following an overnight rally from Wall St, Asian markets were mostly up yesterday as the Powell commented that further super-sized interest-rate hikes is rare after the Fed delivered its biggest hike since 1994 by a 0.75% to 1.50-1.75%, relieving the fears of a hard landing in the US economy. Overnight, US stocks ended sharply lower, reversing a relief rally that came on the heels of the Fed’s 0.75% hike decision. The Dow plunged 741pts to 29,927 (-19% from all-time high 36,952), closing below a crucial 30,000 psychological level for the 1st time since Jan 2021. Risk-off mood returned amid renewed worries that aggressive action by the Fed to combat inflation could push the US into a recession whilst a notable shift to more hawkish tones by global central banks further dented sentiment.

Malaysia. Tracking the Dow rally yesterday, KLCI jumped 13 pts to 1,472.7, with Nestle, PETDAG, and HLFG spearheading the gain while glove counters continued to dip into a fresh 52-week low. Despite the headline gains, market breadth (gainers/losers) was subdued, with 556 losers outpacing 392 winners. Foreign institutions remained as net sellers (-RM100m, 5D: -RM583m; YTD: +RM6.56bn), its 9th day of net outflows out of 11 sessions in June. Meanwhile, local institutions (+RM69m; 5D: +RM322m; YTD: -RM7.89bn) and retailers (+RM31m, 5D: +RM261m; YTD: +RM1.33bn) were major net buyers.

TECHNICAL OUTLOOK: KLCI

Although KLCI is grossly oversold and trading above the long -term support area, the prevalent headwinds will keep the benchmark to lock in a tug-a-war within our envisaged support at 1,429-1,450 and resistances near 1,475-1,500 range until a decisive breakout or breakdown evolves. A major breakout above 1,500 may lift the index to retest 1,530 -1,550 zones. On the flip side, failure to hold up above this support area will trigger a steeper selloff towards 1,390-1,400 territory.

MARKET OUTLOOK

With prevalent headwinds such as (i) elevated inflation, (ii) hawkish Fed, (iii) rising geopolitical conflicts, (iv) renewed political fluidity amid speculation of GE15 in 2H22, and (v) aggressive QT that will trigger a resumption of foreigners’ net outflo ws, continue to weigh market sentiment, we reckon further wild swings ahead for KLCI (key supports: 1,429-1,450; resistances: 1,490-1,500). However, we notice the recent market rout presents an opportunity for investors to accumulate value stocks as the positives from Malaysia’s reopening will still outweigh in 2H22 to drive economic recovery. HLIB top picks are ARMADA, DNEX, EVERGRN, FOCUSP, KOBAY, TENAGA, SUNWAY, ASTRO, PMETAL, SIMEPLT, BURSA and RHBANK.

VIRTUAL PORTFOLIO POSITION – FIG1

Yesterday, We Closed Our Position on REVENUE (4.8% Loss) Amid Weakening Technicals.

Source: Hong Leong Investment Bank Research - 17 Jun 2022