MARKET REVIEW

Asia/US. Ahead of Powell’s congressional testimony, most of the Asian markets ended lower, led by a 1.1% slide on SHCOMP following the release of weak China trade data coupled with a lower-than-expected 2023 GDP target for China announced at the annual National People's Congress over the weekend. After surging 775 pts in the last four consecutive sessions, Dow slid 575 pts at 32,856 after Powell stated Fed rates may have to rise higher for longer during his testimony to Congress as the latest economic data have come in stronger than expected. Now, the odds of a 50 bps hike at the 22 Mar FOMC meeting jumped to nearly 71% from 24% a day earlier while the 10Y-2Y US yield spread inverted further into -1.03 (the lowest since Oct 1981), intensifying the fears of a looming US recession.

Malaysia. Bucking lower regional markets, KLCI advanced 5.9 pts to 1,458.6, as sentiment was boosted by the highly anticipated 2023 Investment Malaysia Conference today and the expectation that BNM will maintain its OPR on 9 Mar. Market breadth, however, slipped into negative territory at 0.89 from 1.22 the previous day, with turnover rose by 4.9% to 2.98bn shares valued at RM1.89bn. Foreign investors (-RM78m, Mar: -RM430m) continued their selling mode for the 5th consecutive session followed by retailers (-RM5m, Mar: -RM55m) whilst local institutions (+RM83m, Mar: +RM485m) were the major net buyers for the 5th straight Day.

TECHNICAL OUTLOOK: KLCI

In view of grossly oversold technical coupled with the multiple long -legged Doji and Hammer formations, KLCI is poised for a downtrend reversal. A successful breakout above the short-term obstacles located near the 1,471-1,478-1,490 levels will spur KLCI towards the 1,500–1,528 mark. Conversely, further retreat below 1,444 (1 Mar low) could attract fiercer selling forces towards 1,410-1,432 zones.

MARKET OUTLOOK

Tracking overnight slump from Wall St, KLCI is likely to remain choppy ahead of the BNM’s OPR decision on 9 Mar. Nevertheless, given the grossly oversold technical indicators and its undemanding CY2023 valuation (12.8x vs 10Y mean 16.8x), downside risk is likely to be cushioned at 1,430-1,440 zones. Conversely, the benchmark could face critical resistance at 200D MA near 1,471-1,490-1.500 levels, taking cues from persistent foreigners’ net outflows (for the 7th consecutive month), the weak RM (vs USD) due to concerns about a higher and longer Fed rate upcycle and a widening FFR-OPR spread, as well as escalating geopolitical anxieties (e.g. Russia-Ukraine war and US-China ties).

Source: Hong Leong Investment Bank Research - 8 Mar 2023