MARKET REVIEW

Global. Tracking Wall Street’s surge last Friday, MSCI All Countries Asia Pacific Index rose 1.53% to 161.14, boosted by easing consumer inflation expectations in the University of Michigan’s final June reading, Shanghai’s declaration of victory against Covid -19 over the weekend, and expectations of more accommodative policies by China to stimulate bruising economy. As inflation woes and monetary policy outlook remained at the forefront of concerns, Dow shed 62 pts to 31,438 on profit taking after rallying 5.4% WoW whilst Brent oil prices edged up 1.97% to USD115 ahead of G7 talks on new Russian sanctions and expectations of improving demand in China amid easing Covid-19 restrictions. On economic front, new orders for US-made capital goods went up for the 3rd straight month in May while pending home sales unexpectedly rebounded in May (1st rise in 7 months).

Malaysia. Bucking strong regional markets, KLCI inched up 1.4 pts to 1,438.1 after hovering in a tight 1,431.7-1,441.0 band as investors weighed on the paucity of earnings and GDP growth in 2H22 following government’s recent subsidy rationalization measures and the possibility of further OPR hikes due to hawkish tone by major central bankers amid elevated inflation. In a lacklustre session, retail investors were the biggest net buyers (+RM44m, 5D: +RM89m; YTD: +RM1.49bn) vis-à-vis net selling trades by local institutions (-RM12m; 5D: -RM13m; YTD: -RM7.85bn) followed by foreign institutions (-RM32m, 5D: - RM77m; YTD: +RM6.36bn).

TECHNICAL OUTLOOK: KLCI

After plunging 113 pts in five weeks, the index could stage a further oversold rebound this week in anticipation of 1H22 window dressing activities, as technical indicators are on the mend. However, further upside may be capped near stiff neckline resistances at 1,476 levels. Only a successful breakout above 1,476 would lift KLCI to revisit 1,500-1,515 zones. Conversely, any sharp drawdown may be cushioned at 1,395-1,415 territory.

MARKET OUTLOOK

We reckon Bursa Malaysia to stay choppy (supports: 1,395-1,415; resistances: 1,453- 1,476-1,500) amid prevalent headwinds such as (i) elevated inflation, (ii) potential capital outflows amid aggressive Fed, (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 rationalization measures. However, KLCI could be subjected to 1H22 window dressing activities this week after sliding 129 pts or 8.2% YTD. We like undervalued KLCI components stocks such as

MAYBANK, TENAGA, PETDAG, PCHEM, RHBBANK, PMETAL and SIMEPLT, which have a combination of growth and defensive qualities to ride through the current storm.

Source: Hong Leong Investment Bank Research - 28 Jun 2022