MARKET REVIEW

Asia/US. Ahead of the National People’s Congress in China on 5 Mar, Asian markets closed mixed, as investors recalibrated expectations for the likely peak in Fed rates after US10Y bond yield surpassed 4% mark on repeated hawkish languages from the Fed officials. Despite surging US10Y Treasury yield (+6 bps to 4.06%), the Dow jumped 341pts to 33,003 as investors welcomed a less hawkish rhetoric from Fed Bostic (he is in favour of a 25 bps hike and the Fed could pause sometime this summer), brushing off a mild decline in weekly jobless claims. In corporate news, Salesforce (+11.5%) and Macy’s (+11.1%) prices surged as earnings topped estimates while Tesla slipped 5.8% as its "Master Plan 3" fell short of details.

Malaysia. KLCI rose 5.3 pts to 1,455.5, snapping a 6th consecutive fall of 23.8 pts, led by bargain hunting activities on IHH, AXIATA, TENAGA, PCHEM, PETDAG and CDB. Market breadth recovered to 0.83 from 0.35 the previous day, with turnover sliding 31% to 3.21bn shares valued at RM2.04bn as selling pressures subsided. Local retailers (+RM43m, Mar: +RM86m) and local institutions (+RM31m, Mar: +RM86m) were the main net buyers while foreign investors (-RM74m, Mar: -RM158m) resumed their selling mode on the 2nd 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 1,473-1,480-1,490 levels. If the index successfully surpasses these barriers, it will advance towards the 1,500– 1,528 mark. Conversely, further retreat below 1,444 (1 Mar low) could trigger another correction towards 1,410-1,432 zones.

MARKET OUTLOOK

Mirroring overnight rebound on Wall St, Bursa Malaysia could see further recovery in the near term (support: 1,410-1,432-1,443, resistance: 1,473-1,490-1,500), supported by grossly oversold indicators and KLCI’s undemanding CY2023 valuation (~12.8x P/E vs. 10Y mean 16.8x). Yet given the continuous net outflows of foreigners, the weak RM (vs USD) amid concerns about a longer Fed rate cycle and a widening FFR-OPR spread, as well as escalating geopolitical anxieties (eg Russia-Ukraine war and US-China ties), the local market should continue to be under pressure, with formidable barriers situated at 1,500-1,528 levels.

Source: Hong Leong Investment Bank Research - 3 Mar 2023