Global. In a holiday-thinned trade (China, South Korea, Taiwan and Hong Kong markets were closed), most Asian markets ended mixed after Trump’s Covid-19 diagnosis and uncertainty of the prospects of another US Covid-19 fiscal stimulus. Last Friday, the Dow tumbled as much as 434 pts to 27383 before paring the losses to 134 pts at 27683 (+510 pts WoW), as investors reacted to a disappointing Sep jobs’ report, the new fiscal stimulus impasse and news that Trump had tested positive for the Covid-19.

Malaysia. Tracking lacklustre regional markets and soaring coronavirus cases and clusters locally, KLCI dropped as much as 7.1 pts to 1489 as fears of more targeted enhanced movement control orders (TEMCOs) would dampen the ongoing nascent economic recovery. However, active buying interests on rubber glove and healthcare-related stocks saw the index to rebound strongly by finsishing 3.5 pts higher at 1500.3 (-8.8pts WoW).

Last Friday, we saw mass exodus of retailers (-RM206m) as they became net sellers at the level unseen since 3 June 2019 (-RM518m) while local institutional (+RM148m) and foreign (+RM58m) investors were the net buyers. For the week ended 2 Oct, local institutional investors bought RM715m (+8.7% WoW) in equities vs retail investors’ net selling plunged 44.2% WoW to RM171m. As expected, foreign investors’ intensified selling of RM544m worth of local equities (+55% WoW), probably due to the heightened uncertainty on the political front. YTD, foreign investors net selling has amounted to RM21.6bn while the local institutions and retailers were net buyers at RM10.8bn and RM10.8bn, respectively.

TECHNICAL OUTLOOK: KLCI

The odds continue to favour the bears, as the KLCI remains in the downtrend channel amid recent technical breakdowns below multiple key SMAs supports. Near term major supports are situated at 1488 (lower BB), 1474 (11 Sep low) and 1456 (lower downtrend channel) while resistances are pegged 1507 (mid BB) and 1518 (downtrend line from 1618) levels. Only a decisive breakout above 1518 hurdle will negate the current downtrend and advance higher towards 1525 (upper BB), 1541 (17 Sep high) and 1545 (30D SMA) zones.

MARKET OUTLOOK

The bulls attempted to push the KLCI above the 1518 (downtrend line from 1618) resistance in the last few days but buying momentum could not be sustained as concerns over a liquidity squeeze on the stock market after the expiry of 6M grace period for loan repayments (ended 30 Sep) coupled with soaring coronavirus cases (surged 109% WoW to 1462 cases with the highest single day record of 317 cases on 3 Oct) and clusters locally. Hence, market sentiment should worsen in the short term (supports 1474-1488; resistances 1506-1525) amid concerns of more TEMPOs, which would adversely affect the greenshoots of the country’s economic recovery. On stock selection, rubbler glove and personal protective equipment (PPE) stocks should be attractive for short term trading amid virus resurgence worries.

VIRTUAL PORTFOLIO - FIG1

In the wake of the market uncertainty, we had closed FRONTKN (3.9% gain) and POS (4.2% loss) last Friday amid weakening technicals.

Source: Hong Leong Investment Bank Research - 5 Oct 2020