MARKET REVIEW

Asia/US. Most Asian markets ended lower from early steep losses after the beleaguered Credit Suisse Group tapped a USD54bn lifeline from the Swiss National Bank lifeline, alleviating exacerbated concerns about the health of the global financial system. The Dow slid as much as 303 pts in early trades amid news that the First Republic Bank could be the next victim after the collapse of Silicon Valley Bank, Silvergate and Signature Bank. Nevertheless, the index rebounded to end +372 pts at 32,246 after a consortium o f US mega banks agreed to inject USD30bn in capital into the troubled bank. Meanwhile, the Nasdaq 100 surged 2.7% on hopes that the crisis could push the Fed to adopt a less aggressive path on the 22 Mar FOMC meeting (80% bet a 25 bps hike to 4.75%-5.0%), notwithstanding the ECB's decision to raise rates by 50 bps yesterday to 3.5%.

Malaysia. KLCI resumed its descent, falling 12.3 pts to 1,391.6 (Mar: -4.3%) in line with lower regional markets. Market breadth slipped to 0.33 from 2.09 the day before. Forei gn investors remain net sellers for the 12th straight session (-RM100m, YTD:-RM1.69bn) followed by retailers (-RM11m, YTD: +RM0.11bn) while local institutions (+RM111m, YTD: +RM1.58bn) were the only net buyers.

TECHNICAL OUTLOOK: KLCI

After sliding 104 pts or 6.9% YTD, KLCI is ripe for an oversold rebound, tracking overnight Wall St rally. Nevertheless, the bears are likely to have the upper hand in the near term, unless the benchmark can swiftly reclaim key hurdles at 1,403 (76.4% FR), 1,423 -1,433 (13 Mar gap) and 1,444 (support -turned-resistance) levels. Meanwhile, should key supports near 1,384 (downward objective after violating the 1,444 support) and 1,373 (13 Oct low) are violated, the index could slip further 1,343-1,350 territory.

Daily KLCI: Crucial 1,373-1,384 support to prevent further slump towards 1,343-1,350 next

MARKET OUTLOOK

Mirroring the overnight rebound from Wall St, KLCI is likely to witness an oversold rebound after sliding 106 pts or 6.9% YTD. Nevertheless, jittery mood prevails, with stiff hurdles at 1,423-1,433 gap and 1,467 (200D MA) levels as investors recalibrate (1) a protracted correction on Wall Street amid Fed’s policy 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 RM5.6bn), (3) weak RM (vs USD) due to widening FFR-OPR spread, (4) escalating geopolitical anxieties, and (5) upcoming six states’ elections (expected by July). Given KLCI's undemanding CY2023 12.5x P/E (vs. 10Y mean 16.8x) and the oversold readings, downside risk may be cushioned at 1,350-1,373-1,384 zones.

Source: Hong Leong Investment Bank Research - 17 Mar 2023