MARKET REVIEW

Asia/US. The MSCI All Countries Asia Pacific index fell 1.1% to 162.7 (-2.2% WoW) as investors' confidence was rattled by the recent strong economic data and the robust US inflation print, as well as by more hawkish signals from Fed officials' speeches, which raised worries that interest rates would continue to rise. As investors continue to speculate about how far the Fed would go to combat sticky inflation, the Dow closed the day +130 pts higher at 33,827 (-42 points WoW) after varying between -180 pts and +150 pts intraday, ahead of the President’s Day holiday today. Fed Governor Michelle Bowman said last Friday that there is still work to be done before the central bank feels they have attained the 2% target, even though other Fed speakers had expressed openness to a 50 bps rise at 22 March FOMC meeting. Some key developments this week are: (1) the Feb S&P US manufacturing and services PMI, (2) Jan PCE on 24 Feb (a Fed’s preferred measure of inflation), and (3) major retailers’ results from Walmart and Home Depot (on 21 Feb).

Malaysia. Following lower regional markets, the KLCI lost 7.4 pts to 1,476.9 (+2.3 pts WoW), as sentiment was weighed down by a weakening RM against the USD to RM4.43 last Friday (-5% since hitting a low of RM4.22 on 27 Jan), caution over the persistence of high global interest rates, and rumours that prosperity tax and capital gain tax may be proposed in the upcoming Budget 2023 (24 Feb) as potential options for the governm ent to raise tax revenue. Foreign institutions emerged as the major net sellers (-RM26m, Feb: - RM246m) after net buying RM221m shares from 13-16 Feb, followed by local institutions (- RM14m, Feb: +RM67m). Local retailers (+RM40m, Feb: +RM179m) were the only net buyers after net selling -RM102m in three straight days.

TECHNICAL OUTLOOK: KLCI

KLCI dropped for a 2nd day in a row after bouncing 23.6 pts in the previous four sessions, closing -7.4 points at 1,476.9, a tad below the 200D MA (1,478 now). We once again stress that for KLCI to go further towards the 1,500-1,528 zones, a decisive breakout above the 200D MA and 20D MA (1,487) barriers is required. On the other hand, a major breakdown below the 200D MA will result in a further selloff near 1,450-1,460 levels.

Daily KLCI: Consolidation prevails unless staging a successful breakout above 200D MA (1,478) and 20D MA (1,487) hurdles

MARKET OUTLOOK

This week, awaiting clearer cues from the critical Budget 2023 presentation and the local ongoing results season, the KLCI may be stuck in an extended sideways consolidation (support: 1,460-1,470; resistance: 1,487-1,500) in line with the hawkish Fed and sluggish RM. Technically, RGB staged a solid breakout above major 10D/20D/30D MAs last week after forming a strong base at RM0.205 levels. This raises hopes for further ascent above RM0.25-0.27-0.30 levels, while the supports at RM0.20-0.205-0.215 limit downside risk.

Source: Hong Leong Investment Bank Research - 20 Feb 2023