MARKET REVIEW

Global. Asian markets ended mostly higher last Friday, led by a 1.7% rally on SHCOMP (re-opened after a Golden week holiday) amid upbeat Sep PMI services data and a firm rebound in tourism during the holiday week. Sentiment was also boosted by news that the Trump administration is leaning toward a large-scale stimulus bill. Meanwhile, the Dow soared 161 pts to 28567 (+3.3% WoW) as Trump signaled support for a bigger coronavirus aid package. Markets are also starting to assume a Biden victory as a widening lead for the Democratic presidential candidate is seen as reducing the risk of a contested election. is seen as reducing the risk of a contested election.

Malaysia. Encouraged by higher regional markets and continuous foreign investors’ buying, KLCI jumped 10.9 pts at 1519.5 and ended the week 30 pts higher on bargain hunting after slipping to a weekly low of 1489.6 on 7 Oct. Trading volume increased to 6.6bn shares valued at RM2.9bn against Thursday’s 6.2bn shares worth RM3.23bn. Market breadth was bullish with 718 gainers as compared to 307 losers, led by strong gains on FBMMSCAP (+1.4%), FBMSCAP (+1.2%) and FBMACE (+0.7%). Foreign investors were major net buyers (RM127m) against local retailers (-RM8m) and local institutional (- RM119m) investors. WoW, local institutional investors recorded RM41m net purchase compared with local retailers (-RM13m) and foreign investors (-RM28m).

TECHNICAL OUTLOOK: KLCI

Following the successful downtrend line breakout from the YTD high of 1618 (29 July) and a strong 30-pt weekly rally, KLCI outlook has turned increasingly positive. Underpinned by bottoming up indicators, KLCI is on course for higher upside in the weeks ahead towards 1537 (50D SMA), 1546 (50% FR) and 1563 (61.8% FR). Conversely, failure to defend the 1511 (downtrend line from 1618 high) and 1499 (200D SMA) levels will favour the bears again, engaging in a prolonged downward consolidation to 1487 (lower BB) and 1474 ( 10 Sep low) levelslow) levels.

MARKET OUTLOOK

Following a bullish downtrend line breakout, KLCI is on course for a higher upside in the weeks ahead towards 1537-1563 zones, supported by bottoming up indicators. However, after surging 30 pts last week, profit-taking may emerge as elevated domestic political uncertainties (Anwar has been granted an audience with Agong on 13 Oct) and more targeted lockdowns amid spiking Covid-19 local transmissions could pose downside economic risks. Sectors wise, major beneficiaries from the imminent 3rd wave of Covid-19 in Malaysia are gloves, technology, telco and courier while sectors most vulnerable appeared to be aviation, retail, F&B, gaming, malls and hotels.

On stocks selection, without a concrete vaccine timeline and compounded by an unabating rise in Covid-19 cases worldwide, appetite on glove stocks may be revived as lofty valuations came back to earth, supported by expectations of upcoming bullish quarterly results in Nov/Dec. HLIB’s current BUY ratings are TOPGLOV, HARTA and KOSSAN.

Source: Hong Leong Investment Bank Research - 12 Oct 2020