MARKET REVIEW

Asia/US. Tracking a prolonged correction from Wall St, Asian markets collapsed amid fears of systemic risk from a brewing banking crisis in the US despite efforts by US regulators to provide a series of emergency liquidity measures. Uncertainty over monetary policy also weighed on sentiment ahead of the key US Feb CPI release later in the evening. After suffering a 5-day slide of 1,612 pts, the Dow staged a 336-pt relief rally to 32,155 as investors weighed the Feb CPI readings (mostly met analysts’ expectations) and the success of limiting the contagion risk following the SVB and Signature Bank fallout, with the authorities taking decisive steps to restore confidence. According to CME FedWatch tool, traders are now anticipating a less aggressive path ahead for the Fed on the 22 FOMC meeting, with 80% expecting a 25 bps rate hike whilst 20% are betting the Fed to pause.

Malaysia. In line with regional markets’ slump and the relentless selling by foreign investors, KLCI plunged 28 pts to 1,393.8, recording its 5th straight decline totalling 65 pts. Market breadth tumbled to 0.20 from 0.36 the day before. Local institutions (+RM138m, Mar: +RM864m) and retailers (+RM113m, Mar: +RM125m) emerged as the net buyers whilst foreign investors (-RM251m, Mar: -RM989m) intensified its net outflows for the 10th consecutive Session.

TECHNICAL OUTLOOK: KLCI

In the wake of recent slide below multiple key supports and ended below 1,400 psychological levels yesterday, the bears seem have the upper hand in the near term. Further supports are pegged at 1,385 (downward objective after violating the 1,444 support), 1,373 (13 Oct low) and 1,352 whilst key resistance are situated at 1,400-1,420- 1,444 zones.

MARKET OUTLOOK

Technically, KLCI is likely to witness an oversold rebound soon after tumbling 65 pts in the last five sessions, in tandem with the overnight Wall St rally. Nevertheless, the road ahead remains rocky and any rebound could be capped at 1,420-1,444-1,468 zones as investors recalibrate (1) a protracted correction on Wall Street amid Fed’s hikes uncertainty, the health of the US banking sector and corporate earnings following Moody’s cuts on US banking system to negative, (2) persistent net foreign outflows (7th consecutive month totalling RM5.4bn), (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 (expected by 3Q). Given KLCI's undemanding CY2023 12.3x P/E (vs. 10Y mean 16.8x) and oversold readings, downside risk may be cushioned at 1,352-1,373-1,385 zones.

VIRTUAL PORTFOLIO (FIG1)

We had squared off our virtual portfolio stocks such as MYEG (9% gain), TOMEI (7.3% gain), RHBBANK (2.6% gain), ABMB (2% loss), UMC (8.2% loss) and BJFOOD (9.9% loss) yesterday in view of the bearish market sentiment.

Source: Hong Leong Investment Bank Research - 15 Mar 2023