MARKET REVIEW

Asia/US. Prior to the US Feb jobs data, the MSCI All Countries Asia Pacific index slid 1.3% to 157.92 (-2% WoW), taking cue from a bank-led selloff from the Wall Street slump overnight amid worries that the Silicon Valley Bank crisis (16th largest US bank) and the collapse of crypto-focused lender Silvergate could create a domino effect to the financial system. Ahead of the key US Feb CPI print (14 Mar), the Dow suffered a knee-jerk selloff of 315 pts to 31,909 (-4.4% WoW), marking its 4th straight decline as fears of contagion spread throughout the banking sector following SVB Financial Group's closure by regulators to protect depositors after efforts to secure funding had failed. The SVB’s collapse (the biggest bank failure since 2008) overshadowed expectations that the Fed may rethink its aggressive rate hikes schedule after the Feb jobs report, which gave some hints that inflation could be slowing on the smaller-than-expected gain in wages.

Malaysia. In sync with regional markets’ slump, KLCI slid 16.5 pts to 1,433.1 (-1.4% WoW), with 25 component stocks were in the red. Market breadth fell further to 0.34 from 0.89 the day before. Local institutions (+RM106m, Mar: +RM702m) and retailers emerged as the largest net buyers, while foreign investors (-RM141m, Mar: -RM726m) continued their selling binge for the 8th session in a row (7th consecutive month totalling RM5.14bn).

TECHNICAL OUTLOOK: KLCI

Near term outlook has turned bearish after sliding below the key neckline 1,444 (1 Mar low) territory, with 1,400-1,410–1,430 serving as the next critical support zones. Meanwhile, the cluster of hurdles at 1,444, 1,462 (20D MA), and 1,470 (200D MA) must be quickly and successfully cleared in order to retest higher upside targets at 50D MA (1,477), 1,491 (23.6% FR), and 1,500 levels.

MARKET OUTLOOK

KLCI is likely to experience a rebound today in response to US regulators' decision to backstop all depositors in SVB and other banks, but the road ahead is still rocky due to (1) extended correction on Wall Street amid Fed’s hikes uncertainty and SVB’s shockwaves, (2) persistent net foreign outflows, (3) weak RM (vs USD) due to widening FFR-OPR spread, (4) escalating geopolitical anxieties, and (5) upcoming UMNO elections on 18 Mar and the six states’ elections (by 3Q23). Nevertheless, KLCI's undemanding CY2023 12.8x P/E (vs. 10Y mean 16.8x) and oversold readings may cushion further slide near 1,400- 1,430 zones whilst key hurdles are situated at 1,450-1,470-1,500 levels.

Source: Hong Leong Investment Bank Research - 13 Mar 2023