HLBank Research Highlights

Traders Brief - Potential Oversold Rebound Amid Wall St Rally and Mid Year Window Dressing

Publish date: Mon, 27 Jun 2022, 09:34 AM
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This blog publishes research reports from Hong Leong Investment Bank


Global. Tracking an overnight rebound in US markets, MSCI All Countries Asia Pacific Index jumped 1.19% to 159.21, boosted by President Xi’s pledge to meet China GDP goal of 5.5% (consensus: +4.1% YoY) via adopting more effective measures and macro -policy adjustment, relieving the fear of hard landing in China economy. Last Friday, the Dow rocketed 823 pts or 2.68% to 31,500 (+5.4% WoW) as Wall Street scaled back expectations for ultra-aggressive Fed’s monetary policy tightening. The final June consumer sentiment index was downwardly revised to a record low at 50, while the 12M inflation expectations by consumers easing back to 5.3% (from 5.4% previously).

Malaysia. Tracking higher regional markets, KLCI soared 5.65 pts to 1,436 (-20 pts or 1.4% WoW), led by PMETAL, PCHEM, PBBANK, IHH and MAYBANK. Market breadth (gainers/losers) recovered to 1.5 from 0.70 a day before. In a lackluster session, retail investors were the biggest net sellers (-RM27m, 5D: +RM69m; YTD: +RM1.45bn) vis-à-vis net buying trades by local institutions (+RM20m; 5D: -RM8m; YTD: -RM7.84bn) followed by foreign institutions (+RM7m, 5D: -RM61m; YTD: +RM6.39bn).


Judging from a steeply oversold KLCI after plunging 113 pts in five weeks, the index could stage a further relief rebound this week in anticipation of 1H22 window dressing activities. However, further upside could be capped near stiff resistances at the neckline 1,476 levels. Only a successful breakout above 1,476 would lift KLCI to revisit 1,500-1,515 zones. On the flip side, any sharp drawdown may be cushioned at 1,395-1,415 territory.

Daily KLCI: Potential Oversold Rebound


In anticipation of a 1H22 window dressing activities coupled with a rally in Wall St last Friday, an oversold rebound is still on the cards for this week. However, strong upside may be capped on the back of prevalent internal and external headwinds such as (i) elevated inflation, (ii) potential capital outflows amid aggressive Fed and QT, (iii) protracted Russia Ukraine war, (iv) heightened US -China conflict, (v) political fluidity amid speculation of GE15 in 2H22 and (vi) the paucity of earnings and GDP growth in 2H22 following government’s recent subsidy rationalisation measures. Key weekly supports are pegged at 1,395-1,415 whilst resistances are near 1,453-1,476-1,500 levels.


Source: Hong Leong Investment Bank Research - 27 Jun 2022

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