MARKET REVIEW

Asia/US. Asian markets ended mostly higher following a set of robust China Feb manufacturing and services PMIs due to the removal of a zero -COVID policy recently, overshadowed the prospect of a higher peak for US Fed rates. Sentiment was also boosted by optimism that more measures may be announced in the National People’s Congress (5 Mar) to sustain the strong economic momentum. The Dow closed +5 pts at 32,662 after fluctuating between 90-pt gain and 156-pt losses intraday while the Nasdaq tumbled 0.7%, as investors weighed the poorer-than-expected Feb manufacturing PMI and the Fed’s future course of monetary policy coupled with rising UST10Y (+7 bps to 3.99%). Meanwhile, EV stocks were also in focus as Tesla (-1.43% to USD202) kicks off its investor day, with the EV maker expected to lay out its Master Plan 3 and provide insights about its broader strategic roadmap ahead and lays the foundation for the green tidal wave hitting globally on the shift to EVs.

Malaysia. Tracking overnight fall from Wall St, KLCI lost as much as 9.8 pts before paring its losses to 1.3 pts at 1,450.2 (its 6 th consecutive fall of 23.8 pts), in line with a rebound in regional markets on robust China economic indicators. Market breadth recovered to 0.83 from 0.35 a day earlier, with turnover slid 31% to 3.21bn shares valued at RM2.04bn as selling pressures subsided. Local retailers (+RM43m, Feb: +RM428m) and local institutions (+RM41m, Feb: -RM258m) were the main net buyers while foreign investors (-RM84m, Feb: -RM170m) resumed their selling mode on the 1st day of March (its 7th consecutive month of net outflow).

TECHNICAL OUTLOOK: KLCI

Following the two long-legged Doji and Hammer formations, KLCI could stage a possible downtrend reversal soon, with short-term obstacles located near the 1,474-1,480-1,490 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

The local market should remain under pressure on an extended consolidation on Wall Street, persistent foreigners’ net outflows, sluggish RM (vs USD) amid worries about a protracted Fed rate upcycle and a widening FFR-OPR spread, as well as rising geopolitical concerns (i.e. Russia-Ukraine war and US-China ties). However, the benchmark's undemanding CY2023 valuation (~12.8x P/E vs. 10Y mean 16.8x) and oversold technical indicators should limit downside risk (support: 1,432-1,443, resistance: 1,474-1,490).

Source: Hong Leong Investment Bank Research - 2 Mar 2023