MARKET REVIEW

Asia/US. Mirroring the slide on Wall Street last Friday, Asian markets ended mostly lower as investors boosted their expectations for higher and longer Fed rate hikes following a strong US Jan PCE report. After sliding 1,010 pts WoW, the Dow staged an oversold 372-pt rebound before trimming the gains to +72 pts at 32,889 as investors recalibrated a weak Jan durable goods orders, upbeat US Jan home sales and reassessed the outlook for monetary policy after last week’s hotter-than-expected economic data. In the meantime, further worries about a potential recession were raised as the 2Y-10Y Treasury yield curve further inverted to -0.86, the steepest inversion since Oct 1981.

Malaysia. In line with a downbeat regional markets, the KLCI fell as much as 9.3 pts before paring its losses to 1.3 pts at 1,455.5 (its 4th consecutive decline), as investors continued to digest the revised Budget 2023. Market breadth fell to 0.64 from 0.78 last Friday, remaining negative for the 14th out of the 16 sessions. Foreign institutions net sold RM179m (Feb: - RM179m) after net buying RM246m for the 5th straight session, while local institutions (+RM132m, Feb: -RM180m) and retailers (+RM47m, Feb: +RM359m) were the main net buyers.

TECHNICAL OUTLOOK: KLCI

Following the two long-legged Doji formations, KLCI could stage a possible downtrend reversal soon, with short-term obstacles located near the 1,475-1,481-1,490 levels. The index will only move higher towards 1,500–1,528 levels with a successful breakout over these hurdles. On the other hand, a decisive breakdown below 1,447 (27 Feb low) might lead to a further correction toward 1,432 zones.

MARKET OUTLOOK

In the absence of significant market-unfriendly policies in the revised Budget 2023 and negative surprises of the 4Q22 results season, some market relief may be in store. The two long-legged Doji candlesticks and the benchmark's undemanding CY2023 valuation (12.8x P/E vs. 10Y mean 16.8x) may boost the index to retest 1,475-1,500 barriers in the near term. However, a prolonged Wall St consolidation, sluggish RM (vs USD) amid anxiety over a protracted Fed rate upcycle and widening FFR-OPR spread, as well as escalating geopolitical tensions, could limit further rally at 1,528 (6M high) to 1,542 (200W MA) territory.

Source: Hong Leong Investment Bank Research - 28 Feb 2023