MARKET REVIEW

Asia/US. Most Asian markets ended lower on the back of hawkish signals from the Fed to curd elevated inflation, surging Covid cases (reported a 1st death in six months) and fresh lockdowns in China, as well as diminishing optimism over the potential scaling back of the China’s strict zero-Covid policy. Ahead of the holiday-shortened week due to Thanksgiving (will be closed Thursday and early Friday) and the Nov FOMC minutes on Wednesday, the Dow eased 45 pts at 33,700 after gyrating within 305 pts intraday, as investors weighed on the speeches by Fed officials and rising worries about further lockdowns in China due to escalating Covid cases.

Malaysia. Knee-jerk selldown due to an unprecedented hung parliament election outcome and pending a new government formation witnessed the KLCI tumbling as much as 22 pts before trimming the losses to end -1.3 pts at 1,448. On funds flow, foreign investors were the major sellers (-RM167m, Nov: -RM282m) for a 4th consecutive day followed by local institutions (-RM22m, Nov: +RM88m) while retailers (+RM189m, Nov: +RM194m) were the major net buyers in the last four sessions.

TECHNICAL OUTLOOK: KLCI

Pending the formation of a new government today, KLCI is likely to experience further consolidation ahead, with major supports pegged at 1,373-1,400-1,420 levels. Conversely, only a strong breakout above downtrend line (DTL) near 1,454 could spur further advance towards 1,468-1,482 zones.

MARKET OUTLOOK

As a hung parliament election outcome is unprecedented for Malaysia and the possibility of higher political risk premium and regulatory risks (due to the unexpected strong showing by PAS), KLCI may witness further volatility ahead (compounded by ongoing results season), premised on the duration of the power vacuum (PM and its alliances are likely to be named by the Agong at 2pm today), the quality of the Cabinet team, and the parliamentary majority of the eventual government that could institute further institutional and political reforms. Immediate supports are situated at 1,400-1,420 whilst a more solid supports are situated at 1,362-1,373 zones (resistance: 1,454-1,469-1,482). Nevertheless, we believe the current impasse won’t be long drawn. We would nibble on any weakness to bet on the probability of a positive Dec from the “window dressing effect.

Source: Hong Leong Investment Bank Research - 22 Nov 2022