Global. Asian markets slipped after Trump halted bipartisan talks over a new coronavirus relief package. However, most markets ended mildly higher on hopes that the Trump administration will finally back a more piecemeal approach following Powell’s strongest call for greater spending as the US economy is tilted to the downside. Overnight, the Dow surged 530 to 28303 (rebounded from a 375-pt rout in the previous session) amid optimism that a partial stimulus deal may still happen after Trump tweeted support for aid to airlines and other stimulus measures, including a USD1200 stimulus check for Americans.

Malaysia. Led by foreign investors selloff, KLCI tumbled 19.9 pts at the final minutes to end at 1489.5 amid broad-based selldown on index-linked heavyweights (with 26 stocks down, 2 up and 2 unchanged) as growing worries of more restricted lockdowns and escalating Covid-19 cases and clusters locally coupled with lingering political uncertainty could significantly impact on Malaysia's economic and social systems. Despite the negative headline, market breadth was positive with 637 gainers vs 373 sellers as trading interests rotated to 2nd and lower liners. Yesterday, foreign investors were major net sellers, offloading RM162m worth of shares while local retailers (RM37m) and local institutional (RM125m) investors were the main buyers.

TECHNICAL OUTLOOK: KLCI

Following the sharp pullback yesterday, near term outlook has turned gloomier after breaking the key 1500 or 200D SMA support. Failure to reclaim above 1500 levels in the short term will trigger more selldown toward 1474 (11 Sep low), 1461 (38.2% FR) and 1446 (lower downtrend channel) levels before heading for a more solid oversold rebound. In short, KLCI’s downtrend remains intact unless staging a swift rebound above 1500 and 1513 (downtrend channel resistance from 1618 high) hurdles to re-ignite a fresh rally to 1529 (100D SMA), 1540 (50D SMA) and 1580 (100W SMA) zones.

MARKET OUTLOOK

Although Dow’s 530-pt rally overnight may create a positive spillover effect on Bursa Malaysia today, any rebound is likely to be capped near 1500-1513 zones (key supports now are 1446-1461-1474), due to heightened concerns of further lockdowns and surging Covid-19 cases and clusters locally, coupled with lingering political uncertainty could significantly impact on Malaysia's economic and social systems.

On stocks selection, HLIB reiterates an OVERWEIGHT rating on the glove sector with TOPGLOV as our top buy (other picks are HARTA and KOSSAN). In our view, escalating Covid-19 cases worldwide and without a concrete vaccine timeline, demand for gloves remains robust.

Source: Hong Leong Investment Bank Research - 8 Oct 2020