MARKET REVIEW

Global. Despite upbeat Sep trade data and new bank loans that pointed to China’s economic recovery from the coronavirus crisis, most Asian markets ended lower on profittaking as US stimulus deadlock and a resurgence in Covid-19 cases in Europe hits sentiment. Last Friday, the Dow surged as much as 348 pts to 28843 on the back of betterthan-expected retail sales in Sep and news that a Pfizer vaccine might be submitted for approval by next month. However, the handsome gains were pared off to 112 pts at 28606 (+20 pts WoW) as investors awaited further news on stimulus negotiations amid a resurgence in coronavirus cases in the US and across major European cities.

Malaysia. KLCI tumbled 10.1 pts to 1503.8 (-26.6 pts WoW) as sentiment was dampened by selloff in GENM and GENTING after Fitch downgraded Long-Term Issuer Default Ratings of Genting. Investors also worried about the CMCOs impact on Malaysia’s economy and corporate earnings, compounded by the domestic political tussles. Last Friday, foreign investors net sold RM152m shares whilst local retailers (+RM67m) and local institutional investors (+RM85m) were the main buyers. WoW, local institutional investors and retaliers recorded RM104m and RM133m net purchases, respectively against a cumulative RM237m selloff by foreign investors.

TECHNICAL OUTLOOK: KLCI

Following the weekly slide of 26.6 pts WoW, we are turning more cautious on KLCI short term view. A sharp fall below the downtrend line (from the YTD high at 1618) again near 200D SMA (now at 1497) would reignite a resumption of risk-off mode, potentially pushing the benchmark towards 1488 (lower BB), 1474 (10 Sep low) and 1461 (50% FR) levels. more selling , following a successful downtrend line breakout from the YTD high of 1618 (29 July) last week. More sideways consolidation unless KLCI can swiftly reclaim above 1530 (50D SMA) and 1536 (100D SMA) overhead resistances.

MARKET OUTLOOK

The KLCI tumbled 26.6 pts WoW as Malaysia embraced a tripple whammy crisis following the persistent political wrangling, the rapid Covid-19 outbreak and the economic slowdown. Unless staging a swift retake above 50D SMA resistance near 1530, KLCI’s near term outlook has turned negative, potentially reigniting another selloff towards 1488-1474-1461 territory. Sectors wise, major beneficiaries from the ongoing 2nd 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.

Source: Hong Leong Investment Bank Research - 19 Oct 2020