MARKET REVIEW

Asia/US. MSCI All Countries Asia Pacific index jumped 1.61% to 157.6 (-0.2% WoW), boosted by the fresh lifeline for First Republic Bank coming just a day after Credit Suisse AG was rescued by the Swiss National Bank, while traders also priced in a less aggressive Fed in order to avoid a domino impact on the global economy. Ahead of the crucial FOMC decision on 22 Mar, the Dow slid 384 pts at 31,862 (-0.2% WoW), as a 33% plunge in First Republic Bank and a potential banking sector turmoil kept investors on edge, amid heightened concerns about how many more banks would eventually need to use Fed facilities for liquidity.

Malaysia. KLCI jumped 20 pts to 1,411.7, mirroring the recovery across regional markets as worries over a global banking crisis subsided. Meanwhile, RAM Ratings and BNM assurance that Malaysian banks ratings would remain intact given that the country's banking system are maintaining a strong capital level and resilient cash flow system. Foreign investors remained net sellers for the 13th straight session (-RM91m, YTD:- RM1.78bn) followed by retailers (-RM97m, YTD: +RM0.02bn) while local institutions (+RM188m, YTD: +RM1.77bn) were the only net buyers.

TECHNICAL OUTLOOK: KLCI

As anticipated, KLCI staged a 20-pt relief rally last Friday, tracking Wall St and regional markets’ rallies. Nevertheless, the bears are still likely to have the upper hand in the near term, unless the benchmark can swiftly refill the 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 slide at 1,343-1,350 next

MARKET OUTLOOK

Technically, KLCI is likely to maintain upward momentum this week after last Friday’s 20.1- pt oversold rebound. Nevertheless, jittery mood prevails, with stiff hurdles at 1,423-1,433 gap, 1444 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 downgrades of the US banking system to negative, (2) persistent net foreign outflows (7th consecutive month totalling RM5.7bn), (3) weak RM (vs USD) due to widening FFR-OPR spread, (4) escalating geopolitical tensions (after the International Criminal Court has issued an arrest warrant for Putin before the Putin-Xi meeting on 20-22 Mar), and (5) upcoming six states’ elections (expected by July). Given KLCI's undemanding CY2023 12. 6x P/E (vs. 10Y mean 16.8x) and bottoming up indicators, downside risk may be cushioned at 1350-1,373-1,384 zones.

Source: Hong Leong Investment Bank Research - 20 Mar 2023