MARKET REVIEW

Global. Most of the Asian markets ended higher amid optimism that Trump will return to White House soon and Washington will move closer to providing further fiscal stimulus. Overnight, after rising as much as 206 pts to 28354, the Dow staged a sharp reversal to end 375 pts lower at 27772. Despite Powell’s strongest call yet for greater spending to avoid disrupting the fragile economic recovery, sentiment took a beating following Trump’s abrupt move to abandon negotiations with Congress over a coronavirus relief bill until after the 3 Nov election.

Malaysia. Tracking a strong rally on Dow overnight, KLCI jumped as much as 9.8 pts to 1522.3 but strong profit taking on glove stocks saw the index ending 3 pts lower at 1509.5. Trading volume decreased 0.3bn to 6.0bn shares worth RM3.8bn while market breadth was negative with 315 gainers compared to 749 losers, as sentiment was dampened by worries of total lockdown after a surge in Covid-19 cases and clusters locally. Yesterday, local retailers (RM9m) and local institutional (+RM58m) investors were net buyers while foreign investors (-RM67m) resumed its selling spree after two days of net buying.

TECHNICAL OUTLOOK: KLCI

In the near term, KLCI is likely to trap in the tug of war between bulls and bears until a successful breakout above 1516 (downtrend channel resistance from 1618 high). Breaking this hurdle will re-ignite a fresh upleg toward 1542 (50D SMA) and 1580 (100W SMA) zones. Conversely, failure to break the 1516 barrier will attract a prolonged downward consolidation with major supports situated near 1500 (200D SMA), 1474 (11 Sep low) and 1450 (lower downtrend channel) levels.

MARKET OUTLOOK

Tracking the Dow’s plunge overnight and alarming new Covid-19 cases (reported another new high of 691 comapred with 432 cases on 5 Oct and 317 cases on 3 Oct) and clusters locally, KLCI is likely to trap in the tug of war between bulls and bears until a successful breakout above 1516 (downtrend resistance from 1618 high). Nevertheless, further sharp fall is likely to be cushioned by PM’s assurance yesterday that there will not be another total lockdown but will only enforce the Targeted Enhanced Movement Control Order (TEMCO) in high-risk areas to prevent significant impact on Malaysia's economic and social systems. Major supports are situated at 1450-1474-1500 whilst resistances are pegged at 1516- 1528-1542 levels.

VIRTUAL PORTFOLIO - FIG1

In the wake of the market uncertainty, we had closed DUFU (8.9% gain), JCY (2.7% gain) and DRBHCOM (5.2% loss) yesterday.

Source: Hong Leong Investment Bank Research - 7 Oct 2020