MARKET REVIEW

Asia/US. Asian markets ended higher, led by a 2.06% rally in SHCOMP, on the prospect of more stimulus spending by the government after the PBOC left its 1-year and 5-year prime loan rates unchanged, and growing optimism about China’s economic recovery after it relaxed most anti-COVID restrictions earlier this year. However, lingering worry capped gains as hawkish signals from the Fed officials continued to weigh on sentiment. Overnight, Wall St was closed due to the President’s Day holiday. The US 30 futures wavered amid concern the Fed’s hawkish tone will keep borrowing costs higher for longer outweighed optimism over China’s economic recovery. Sentiment was also dampened by a flurry of geopolitical developments such as (1) Heated debates between Antony Blinken and Wang Yi on everything from Taiwan to North Korea and Russia during last week’s Munich Security Conference, (2) North Korea fired a barrage of suspected ballistic missiles, and (3) President Biden made a surprise visit to Kyiv to show “unwavering support”.

Malaysia. Bucking higher regional markets, the KLCI eased 3.4 pts to 1,473.5 as investors await clearer cues from the critical Budget 2023 presentation and the local results season. Market breadth remained negative at 0.58 from 0.32 last Friday. Foreign institutions resumed its buying spree (+RM62m, Feb: -RM184m) after net buying RM195m shares last week, followed by retailers (+RM16m, Feb: +RM195m) while local institutions (+RM40m, Feb: +RM179m) were the major net sellers (-RM77m, Feb: -RM10m).

TECHNICAL OUTLOOK: KLCI

KLCI dropped for a 3rd day, closing -3.4 points at 1,473.5, a tad below the crucial 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 (1,486) 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.

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 coupled with growing geopolitical tensions. Technically, pullbacks on DNEX near RM0.60 (30D MA) and RM0.57 (50D MA) supports should attract buyers looking for recovery upside towards RM0.75-0.80 hurdles, with a confirmed breakout above RM0.695 (3 Feb high).

Source: Hong Leong Investment Bank Research - 21 Feb 2023