MARKET REVIEW

Global. Asian markets ended mixed as investors kept a wary eye on how the unabated Covid-19 pandemic as a new round of business restrictions and lockdowns would threaten the fragile global economic growth. Sentiment was also dampened by frustration about Congress’ refusal so far to deliver more aid to the struggling US economy.

US markets tumbled overnight after data showing a cooling of US business activity and the deadlock in Congress over more fiscal stimulus aggravated concerns about the nascent economy while the surging coronavirus pandemic remains unchecked. The Dow slid 525 pts to 26763 (-9.5% from all-time high of 29568) and S&P 500 fell 78 pts to 3237 (-9.8% from all-time high of 3588) whilst the Nasdaq Composite plunged 330 pts at 10633 (-11.9% from all-time high of 12074).

Malaysia. KLCI fell as much as 14.6 pts to 1491 as Malaysian political manoeuvring has taken another turn after Anwar Ibrahim said he now garnered a “formidable and convincing” support to form a new government. However, the decline was reduced to 9.3pts at 1496.5 after PM announced a RM10bn Kita Prihatin package to boost economic recovery and Perikatan Nasional’s (PN) coalition dismissed Annuar’s claim as "cheap publicity" and said they firmly supported the premier. Trading volume increased 2bn to 8.5 bn shares worth RM4.3bn. Market breadth was bearish with 163 gainers as compared to 896 losers.

Yesterday, local retailers (RM-24m) and foreign investors (RM-139m) were the major sellers whilst local institutional investors net bougth RM163m in equities. YTD, local institutional and retail investors were the net buyers with RM9.8bn and RM11.2bn, respectively whilst foreign investors net sold RM21bn in equities.

TECHNICAL OUTLOOK: KLCI

After rebounding from a low of 1474 (10 Sep) to a high of 1541 (17 Sep), the weak bulls were unable to make further progress to break above the downtrend channel, with aggressive profit taking pushed down the KLCI further at 1496 yesterday (below the key 200D SMA at 1503). Given the bearish outlook on Wall St and rising domestic political headwinds, KLCI may experience more downside risks in the coming days to retest 1484 (lower BB), 1470 (lower downtrend channel) and 1461 (38.2% FR) before staging a technical rebound. Stiff resistances are situated at 1503, 1521 (23.6% FR) and 1535 levels.

MARKET OUTLOOK

While the announcement of a RM10bn Kita Prihatin package is timely to cushion the fallout of the weak economy, we continue to err on the side of caution given the bearish sentiment on Wall St and nagging domestic headwinds such as 1) heightened political uncertainty ahead of the Sabah polls on 26 Sep after Anwar Ibrahim said he now has enough support in parliament to form a new government, 2) further liquidity squeeze on stock market amid the expiry of 6M grace period for loan repayments by end Sep, 3) review on Malaysia’s position in the World Government Bond Index (WGBI) on 24 Sep (a potential exclusion may dampen further the fragile market sentiment due to a selldown in the bond market and weaken RM), 4) concern over government’s major source of income following Petronas sluggish 1HFY20 results, and 5) rising new Covid-19 cases and clusters in Malaysia. Nevertheless, potential 3Q20 window dressing activities in the next few days may cushion further slide with major supports pegged at 1484-1470-1461 whilst key resistances are situated at 1503-1521-1535 zones.

VIRTUAL PORTFOLIO - FIG1

In the wake of the market uncertainty, we closed ECONBHD (6.5% loss) yesterday amid weakening technicals.

Source: Hong Leong Investment Bank Research - 24 Sept 2020