MARKET REVIEW

Asia/US. Ahead of the important release of the PMIs in the US, China, and Japan, ASEAN markets wavered as investors struggled to assess the outlook for the world economy and central bank policies. As investors evaluated inflation data, Fed policy, and increased geopolitical concern, the Dow fell 233 points to 32,656, ending Feb with a brutal monthly loss of 4.2%. Meanwhile, the 2Y-10Y Treasury yield curve further inverted to -0.89 (-0.36-pt YTD), the worst inversion since Oct 81, intensifying concerns about a probable recession.

Malaysia. KLCI eased 1.3 pts to 1,454.2 (its 5th consecutive fall), following the tepid regional markets, as the selloff in small caps and ACE counters masked the gains by the financial services sector. Market breadth slipped to 0.35 from 0.64 a day earlier, with turnover increased 19% to 4.63bn shares valued at RM3.95bn. Local retailers (+RM69m, Feb:+RM428m) and foreign institutions (+RM9m, Feb: -RM170m) were the main net buyers while local institutions (+RM132m, Feb: -RM180m) resumed their selling spree (- RM78m, Feb: -RM258m) for the 9th out of the last 10 sessions.

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. If the index successfully surpasses these barriers, it will advance towards the 1,500–1,528 mark. Conversely, further retreat below 1,447 (27 Feb low) could trigger another correction towards 1,432 zones.

MARKET OUTLOOK

Without significant market-unfriendly policies in the revised Budget 2023 and negative surprises of the concluded 4Q22 results season, some market relief may be anticipated (resistance: 1,475-1,481-1,490). Meanwhile, the benchmark's undemanding CY2023 valuation (~12.8x P/E vs. 10Y mean 16.8x) and oversold technical indicators should limit downside risk (support: 1,432-1,447). However, a protracted consolidation on Wall Street, a sluggish RM (vs USD) amid worries about a protracted Fed rate upcycle and a widening FFR-OPR spread, as well as rising geopolitical concerns, could prevent a further relief rally with formidable hurdles situated at 1,528 (6M high) to 1,542 (200W MA) range. Technically, ITMAX must maintain strength above the 50D/20D MAs (RM1.48-1.51) resistance levels in order to pursue breakout potential into the RM1.55-1.62 zones, whilst downside supports are seen near the RM1.36-1.40 territory.

Source: Hong Leong Investment Bank Research - 1 Mar 2023