MARKET REVIEW

Asia/US. Most Asian markets fell, led by losses in SHCOMP (-0.76%) and HSI (-2%), as a red-hot US January nonfarm payroll and strong US ISM services data suggested lowered risks of a hard landing and strengthened the case for higher and longer Fed rates amid concerns about elevated inflation. Sentiment was also dampened by underwhelming US megacaps tech results, and growing US-China tensions over a suspected spy balloon raised concerns about possible economic reprisal between the two countries. Ahead of the key Powell’s remarks at the Economic Club of Washington tonight, the Dow slid as much as 243 pts before paring the losses to 35 pts at 33,091 as investors digested soaring US 10Y Treasury yield (+12 bps to 3.64%) following last week’s strong US jobs report and ISM services data, and heightened geopolitical concerns, with the US preparing to impose a 200% tariff on Russian-made aluminum and Washington’s move to shoot down an alleged surveillance balloon from China. Meanwhile, notable results from Disney, Uber, DuPont and PepsiCo will offer further insight into how businesses deal with growing macro headwinds.

Malaysia. Ahead of the US key jobs data and sluggish results from technology bellwethers i.e. Apple, Amazon and Alphabet, KLCI wavered before closing +0.67-pt at 1,490.5 (-7.1 pts WoW) last Friday. Market breadth (gainers/losers ratio) fell to 0.87 from 2.0 previously, whilst daily trading volume shrank 15% at 4.36bn shares worth RM2.41bn ahead of the long weekend Thaipusam holidays. Local institutions emerged as the net buyers for a 5th consecutive days (+RM51m, Feb: +RM62m) followed by local retailers (+RM7m, Feb: - RM29m) while foreign institutions resumed its net outflow (-RM68m, Feb:-RM33m).

TECHNICAL OUTLOOK: KLCI

Following the breakdown below the major support trendline (from 1,373), KLCI near term uptrend could be temporary disrupted. A decisive close further below 200D MA (1,484) may drive the benchmark lower to retest 1,451-1,468-1,477 zones. Only a successful reclaim above the support trendline will reignite a rally towards 1,512-1,528 zones.

MARKET OUTLOOK

Tracking a choppy Wall St and ahead of the Powell’s speech tonight, we expect KLCI to trend sideways in the absence of fresh local catalysts (resistance: 1,500-1,512-1,528, supports: 1,451-1,468-1,477) following a technical support trendline breakdown last week. Key events to watch out for Feb: Ongoing 4Q22 results season, Malaysia’s 4Q GDP (10 Feb), re-tabling of Budget 2023 (24 Feb), and upcoming Parliament sitting (13 Feb-30 Mar).

Source: Hong Leong Investment Bank Research - 7 Feb 2023