MARKET REVIEW

Asia/US. Asian markets ended mixed following Wall St’s slump overnight as investors weighed a litany of hawkish chorus by the US Fed officials to tame inflation with more rate hikes, against Biden’s speech that the spy balloon incident has not further exacerbated tensions between the US and China coupled with his view that the US economy will not fall into recession either this year or next year. Despite a slew of positive earnings from Kellogg, Disney, PepsiCo, Wynn Resorts and MGM Resorts, the Dow surrendered its early 303-pt rebound before ending -249 pts at 33,700 as the 2Y-10Y Treasury yield curve inverted by 85 bps, the deepest inversion since early 1980s, triggering fresh worries about recessionary fear. Sentiment was also dampened by hawkish Fedspeak from Thomas Barkin and traders’ bet that Fed rate may hit 6% in 2023 from 4.50-4.75% now.

Malaysia. Tracking lower regional markets and ahead of the 4QGDP release today, KLCI lodged a 3rd day of decline, slipping 6.1 pts to 1,464.6, led by major selldown in DIGI, MAXIS, MISC, TM, SIMEPLT and DIALOG. Market breadth (gainers/losers ratio) improved slightly to 0.70 from 0.65 the previous day, whilst daily trading volume lost 9% to 3.57bn shares worth RM2.19bn. Foreign institutions resumed their net outflows for a 4th session (- RM41m, Feb: -RM350m) while local institutions (+RM26m, Feb: +RM172m) and local retailers emerged as the net buyers (+RM15m, Feb: +RM178m).

TECHNICAL OUTLOOK: KLCI

The bears are in control now as a result of a clear KLCI breakdown below the key support trendline (from 1,373) and the 20D/50D/200D MA levels. This may prompt a further selldown into lower supports at the 1,430-1,450-1,460 zones before staging a technical rebound. Nevertheless, any relief rally is likely to be capped at 1,490-1,500-1,520 due to lack of fresh catalysts.

MARKET OUTLOOK

Tracking Wall St’s rout and a breakdown below the multiple key supports, KLCI is likely to extend its consolidation mode (supports near 1,420-1,430-1,450; resistance: 1,483-1,500- 1,512) ahead of Malaysia’s 4Q22 GDP data today. Other key events to watch out for Feb: 4Q22 results season, re-tabling of Budget 2023 (24 Feb), and upcoming Parliament sitting (13 Feb-30 Mar). Technically, after hitting a 6M high of RM3.38 (3 Feb), KOBAY is likely to extend its profit taking pullback near RM2.86-2.95-3.00 zones amid weakening technical indicators, before retesting RM3.20-3.38-3.60 hurdles.

VIRTUAL PORTFOLIO (FIG1)

We had squared off our positions on UNIQUE (6.8% gain), BIMB (3.2% loss) and AIRPORT (1.7% loss) yesterday.

Source: Hong Leong Investment Bank Research - 10 Feb 2023