MARKET REVIEW

Global. Despite an overnight rebound in the US markets, most Asian markets surrendered the early gains ahead of the ECB meeting and fears of a resurgence of Covid-19 infections in Asia’s hotspots and dampen further economic growth after curbs were re-imposed in Jakarta. Overnight, Wall St ended lower as heavyweight tech-related stocks resumed their rout after a relief rally on 9 Sep, while elevated jobless claims reminded investors of a still difficult recovery ahead. The Dow tumbled 406 pts to 27534, the S&P 500 slipped 60 pts 3339 while the Nasdaq Composite plunged 222 pts to 10919.

Malaysia. KLCI slid as much as 22 pts intraday before reducing the losses to 6 pts at 1490 on heavy selloff amid a confluence of factors including sliding crude oil prices and ahead of the BNM meeting coupled with persistent slump on top glove makers. Sentiment was also dampened by the rising new Covid-19 clusters in Malaysia and the unexpected decision to put Jakarta’s back into a tougher lockdown. Trading volume increased to 8.4bn shares valued at RM5.5bn against Wednesday’s 7.7bn shares worth RM4.9bn. Market breadth was bearish with 237 gainers vs 1023 losers.

Yesterday, local institutional investors (-RM237m) remained the net sellers whilst foreigners (RM95m) and local retailers (RM142m) were the net buyers in equities. YTD, foreigners net sold RM20.2bn shares compared with net purchases by local institutional funds (RM9.4bn) and retailers (RM10.8bn).

TECHNICAL OUTLOOK: KLCI

Yesterday’s weak close suggests that the bulls may have lost the near term battle in defending the key 200D SMA or 1506 support, despite recovering from intraday low of 1474 levels. Unless making a swift reclaim above 1506 levels in the near term, KLCI is likely to retest the 1474 territory. A decisive breakdown below this support will trigger further selldown to 1461 (38.2% FR), 1428 (20 April high) and 1413 (50% FR) territory. On the upside, a close above 1506 will spur the index higher towards 1522 (23.6% FR) and 1542 (mid BB) levels.

MARKET OUTLOOK

Tracking further downward consolidation on Wall St and technically bearish KLCI, the index is expected to extend its consolidation mode during this seasonally sluggish September outing (tumbled ~1.7% from 2000-2019). Overall, volatility remains elevated amid the

domestic political uncertainty (ahead of the 26 Sep Sabah state election), worries of a Covid-19 resurgence in the fall and winter, escalating US-China tension, potential delay in the vaccine development timelines, a stalemate in Congress over additional pandemic aid coupled with the uncertainty ahead of the looming US presidential election on 3 Nov. Key supports are pegged at 1474-1461-1428 whilst resistances are situated near 1506-1521- 1542.

VIRTUAL PORTFOLIO -FIG1

In the wake of the market uncertainty, we closed our position on FOCUSP (9.2% loss) yesterday.

Source: Hong Leong Investment Bank Research - 11 Sept 2020