MARKET REVIEW

Global. MSCI All Countries Asia Pacific index eased 0.29% to 156.36 as aggressive monetary tightening by global central banks trigger recessionary fears. Overnight, Wall St was closed due to the Juneteenth holiday. Ahead of Powell’s speeches to the House on Wednesday and Thursday, volatility is expected to continue to whipsaw markets due to aggressive monetary tightening in major economies aimed at combating red-hot inflation. In the latest Fed commentary, Governor Waller said he would support another 0.75% on 26- 27 July FOMC meetings while President Mester said the risk of a US recession is increasing.

Malaysia. Tracking sluggish regional markets, KLCI took a further beating, skidding 15.5 pts to 1,441.2 (-102.4 pts YTD) as sentiment was dampened by broad-based selloff in the 13 major sectorial indices particularly energy (-3.9%), financial services (-1.6%), plantation (-1.4%) and telco (-1.8%). Market breadth (gainers/losers) slid to 0.27 from 0.37 a day before. Foreign institutions remained as major net sellers (-RM17m, 5D: -RM366m; YTD: +RM6.43bn), logging 11th day of net outflows out of 13 sessions in June, followed by local institutions (-RM7m; 5D: +RM182m; YTD: -RM7.83bn) vis-à-vis net buying trades by retail investors (+RM24m, 5D: +RM184m; YTD: +RM1.40bn).

TECHNICAL OUTLOOK: KLCI

Despite a steeply oversold market after plunging 129 pts in June (recording 11th day of decline out of 13 sessions), prevalent headwinds will keep KLCI in downward volatility for a while as any technical rebound is likely to face formidable hurdles at 1,450-1,480-1,500 levels. Key support is situated at 1,428. A decisive breakdown will trigger further selloff towards 1,390-1,400 territory.

MARKET OUTLOOK

Bursa Malaysia may witness further downside volatility in the short term (major supports: 1,395-1,428) as investors recalibrate risks around (i) elevated inflation, (ii) potential capital outflows amid aggressive Fed and QT, (iii) protracted Russia-Ukraine war, (iv) heightened US-China conflict and (v) political fluidity amid speculation of GE15 in 2H22. Hence, any oversold rebound (-129 pts in June) may face stiff hurdles at 1,450-1,480-1,500 zones.

VIRTUAL PORTFOLIO POSITION-FIG1

Yesterday, we squared off PMETAL (8.1% loss) and DAYANG (5.1% loss) after hitting stop loss levels.

Source: Hong Leong Investment Bank Research - 21 Jun 2022