MARKET REVIEW  

Asia/US. MSCI All Countries Asia Pacific index lost 0.88% at 166.33 (-1.32% WoW), as sentiment was rattled by extended fall from Wall St on deepening yield curve inversion (a classic signal for a recession), mixed US corporate earnings as well as a string of hawkish chorus by the US Fed officials. After tumbling 477 pts in 2 days, Dow jumped 169 pts at 33,869, paring the weekly loss to 57 pts whilst the US10YT rose 7 bps to 3.73% (+20 bps WoW). Edgy tone prevailed as investors assessed a flurry of 4Q22 mixed corporate earnings and this week’s Jan CPI (14 Feb) and PPI (16 Feb) economic data following a litany of central bank officials’ hawkish remarks. On the data front, a preliminary reading from the University of Michigan Consumer Sentiment Index came in at 66.4 for February, its highest level in a year. Meanwhile, the short-term inflation expectations component of the report ticked upwards to 4.2% while long-term expectations remained unchanged at 2.9%.  

Malaysia. After sliding 25.8 pts in three straight session, KLCI staged a 14.9-pt technical bounce to 1,479.6, reducing the weekly decline to 10.9 pts, cheered by the better -than expected 4Q22 GDP and BNM’s optimism that Malaysia is unlikely to slip into recession in 2023. Despite the headline gains, market breadth (gainers/losers ratio) was negative at 0.75, improving slightly from 0.70 from the previous day, whilst daily trading volume soared 14% to 4.1bn shares worth RM2.5bn. Foreign institutions resumed their net outflows for a 5th session (-RM91m, Feb: -RM441m) while local institutions (+RM35m, Feb: +RM207m) and local retailers emerged as the net buyers (+RM56m, Feb: +RM234m).

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. Unless staging a swift rebound to reclaim 1,482 (200D MA) and 1,489 (mid BB) hurdles, KLCI could still face a further selldown into lower supports at the 1,430-1,450 zones. A successful breakout above 1,482- 1,489 barriers will spur greater upside towards 1,500-1,512-1,528 territory.

MARKET OUTLOOK

Barring a strong breakout above 1,482-1,489 hurdles, KLCI is likely to trap in sideways consolidation this week with key barriers pegged at 1,500-1,512 levels. Key events to watch out: US CPI and PPI data, heightened US-China diplomatic standoff following recent escalating aerial dramas, ongoing 4Q22 results season, persistent selling by foreign investors (YTD: -RM789m), re-tabling of Budget 2023 (24 Feb), and upcoming Parliament sitting (13 Feb-30 Mar).

Source: Hong Leong Investment Bank Research - 13 Feb 2023