The FBM KLCI extended its whipsaw moves on Friday in a broad sell-off amid growing worries on inflationary pressure and recession fears. As sentiment on Wall Street remained fragile following the mixed performance overnight, we foresee investors to remain cautious in the near future. Any of the rebound move is likely to be short-lived as traders might be adopting a selling-into-strength strategy for now. The head of NATO warned of a long Russia-Ukraine war, which may prolong inflation and further derail global economic recovery.

Although there were signs of rebound on the FBM KLCI, the pace of recovery is expected to be measured over the foreseeable future. Following the weakness on Wall Street overnight, we believe that volatility will remain a feature on stocks across Bursa exchange amid the un-easing concerns over rising risk of recession stemmed by persistently high inflation and on-going monetary tightening environment. The lower liners may face another round of selloffs as investors are likely to unwind their position as market uncertainties prevails.

Following the conclusion of the two-day US FOMC meeting that saw the pace of the interest rate hike came in line with market expectations, we think that markets conditions should turn calmer. Mild bargain hunting activities may emerge at least for the near term after majority of the stocks have fallen into the oversold territory. Still, we reckon that the lack of fresh market catalysts and anxieties over the lingering inflationary pressure could result in market environment to remain wary and cautious overtime, which may keep the upside limited.

The FBM KLCI snapped its 8-day losing streak and bounced higher, outperforming the mixed broader market. Given the mixed trading activities on Wall Street, we believe sentiment on the local front may remain tepid ahead of the interest rate decision by the US Fed in the upcoming FOMC meeting. On a side note, the recent South Korea strike could further impact the global supply chain of chip productions.

The FBM KLCI plunged below its 52-week low in tandem with regional peers, shaken by worries that the hot inflation will drag the economy into recession; We have seen net foreign selling continued to increase (5-day cumulative net foreign selling: RM600.1m). Given the significant selloff overnight on Wall Street, we believe there might be another selling wave prior to the US FOMC meeting, eventually impacting the local bourse negatively for the session.

The FBM KLCI posted steep losses last Friday amid regional pullback except for China stock markets; net foreign selling in the past 5 sessions stood at RM446.2m. Global stock market undertone could remain negative as the blistering inflation in the US may fan investors’ worries on further interest rate hikes and more quantitative tightening going forward. We believe the global weakness will spill over to the local front with limited bargain hunting activities as investors trade cautiously ahead of US Fed’s and UK Bank of England’s interest rate decision this week.

The FBM KLCI slumped for the sixth straight session amid regional weakness, marking its longest losing streak since January 2022. Despite the stronger retail sales recorded in April 2022 coupled with the improved unemployment rate which dipped below 4.0%, investors may stay cautious given the heavy selling pressure on Wall Street and European stock exchanges as ECB increased its interest rate by 50 bps, translating to further volatility on local exchange over the near term.

The FBM KLCI lost ground in the final-hour selloff as investors struggled to find a floor amid concerns over elevated inflation and costs pressure. Given the slight negative tone on Wall Street, technology stocks will be under pressured once again. Meanwhile, the elevated Brent crude oil price trading above USD123, coupled with the trucker strike in South Korea could further threaten the global supply chain disruptions and add risks to the global inflation. Having said that, we believe there will be positive trading activities within the recovery-themed sectors as we are transitioning to the endemic phase.