MARKET REVIEW

Global. Asian markets fell in line with overnight slide on Wall St amid worries about the economic malaise, weighed down by surging Covid-19 cases worldwide, fresh lockdowns in France and Germany coupled with the conspicuous absence of any economic relief from Washington before the 3 Nov US election. After diving 1844 pts in 4 days, the Dow staged a 139-pt technical rebound at 26659 with the technology heavyweights rallying ahead of major earnings reports and a robust US 3Q20 GDP calmed lingering worries about surging coronavirus cases the possibility of a contested 3 Nov election outcome. Despite reporting 3Q20 results that topped estimates, most of the technology heavyweights share prices, namely Apple (-4%), Alphabet (+6.7%), Amazon (-1.7%), Facebook (-2.5%) and Netflix (- 0.9%) ended lower after trading hours.

Malaysia. KLCI slipped 5.2 pts at 1495.2 on 28 Oct (Bursa Malaysia was closed on 29 Oct due to Prophet Muhammad holiday), as market sentiment remained cautious ahead of the US election (3 Nov), tabling of Budget 2021 (6 Nov) and ongoing Nov reporting season. Market breadth was thin as a total 4.66bn shares were traded valed at RM3.44bn, with 737 losers thumped 291 winners. Foreign investors were the net sellers (-RM119m) whilst local institutional investors and retailers net bought RM19m and RM100m in equities, respectively.

TECHNICAL OUTLOOK: KLCI

Since rebounding to a high of 1541 (10 Sep ) from 1474 (10 Sep low), the bulls had failed to keep the momentum going as the index fell below multiple key SMAs to a low of 1482 (26 Oct low) before closing at 1495 on 28 Oct. Overall, failure to defend key supports at 1492 (200D SMA) and 1482 could reignite risk-off mode, potentially sending the index lower towards 1474 (10 Sep low), 1461 (50% FR) and 1450 levels. Hence, KLCI is expected to trade range bound unless it can successfully break above 1507 (mid BB) and 1518 (50D SMA) levels. Crossing these barriers will lift the index higher towards 1530 (upper BB), 1541 (17 Sep high) and 1562 (90W SMA) levels next.

Daily KLCI Chart: Range Bound Consolidation

MARKET OUTLOOK

In the short term, we expect KLCI to be stuck in a tug-of-war between the bulls and bears ahead of the US presidential election (3 Nov) and the Budget 2021 presentation (6 Nov) coupled with ongoing Nov reporting season. Moreover, the CMCO extensions in Selangor, KL & Putrajaya for another two weeks until 9 Nov 2020 (contributed over 41% to national GDP) amid spiking Covid-19 local transmissions and clusters underlined the risks to 2H20 economic and corporate earnings recovery. Key resistances are 1507-1518-1530 whilst supports fall on 1482-1474-1461 levels. Stocks wise, the exponential surge in Covid-19 cases in the US and Europe should boost the buying interests for technology and healthcare-related stocks. HLIB’s top picks are TOPGLOV, HARTA, KOSSAN, MAHSING, PHARMA, FRONTKN, INARI, UNISEM and UWC.

Source: Hong Leong Investment Bank Research - 30 Oct 2020