MARKET REVIEW

Global. Despite positive news that Moderna is preparing for the global launch of its potential Covid-19 vaccine (without giving any timeline), Asian markets ended lower following surging coronavirus cases in the US and Europe with UK, Germany and France announced nationwide lockdowns. Meanwhile, uncertainties over the upcoming US election and a delay in the US stimulus aids also dented risk appetite. Last Friday, the Dow plunged as much as 517 pts before narrowing the losses to 157 pts at 26501 (-1834 pts or 6.5% WoW) on technology-induced selloff amid cautious 4Q20 outlook. Sentiment was also weighed down by worries over the deadlock in US fiscal stimulus talks and surging Covdi- 19 cases before 3 Nov presidential election.

Malaysia. Last Friday, KLCI plunged 28.3 pts to end the week 27.8 pts lower at 1466.9 as growing fears of a global and local economic slowdown amid surging coronavirus cases. Sentiment was also edgy ahead of the defining moments this week such as the BNM meeting (3 Nov), US election (4 Nov) and tabling of Budget 2021 (6 Nov). Market breadth was bearish as 1033 losers thumped 203 gainers with a total 5.9bn shares traded valued at RM3.9bn. Foreign investors selling spiked 135% to RM280 (-RM227m in 5days) whilst local institutional investors and retailers net bought RM 209m (5-day +RM109m) and RM71m (5- day +RM119m) in equities, respectively.

TECHNICAL OUTLOOK: KLCI

On the back of heightened external and domestic headwinds, KLCI finally violated the crucial 1474 (10 Sep low) neckline to a low of 1461 (our envisaged 38.2% FR support) before ending at 1466.9 last Friday, forming a bearish Head & Shoulder (H&S) pattern. Failure to recapture swiftly above 1474 and 1492 (200D SMA) levels this week would confirm the return of the bears, potentially triggering further selloff towards 1450, 1428 and 1413 (50% FR) levels. Conversely, a successful reclaim above 1474-1492 would enhance the odds for further technical rebound targets towards 1506 (mid BB) and 1521 (23.6% FR) levels.

MARKET OUTLOOK

Ahead of the major key events, namely the BNM meeting (3 Nov), US election (4 Nov) and tabling of Budget 2021 (6 Nov) as well as the technically bearish Head & Shoulder (H&S) pattern last Friday, KLCI is expected to witness a sharp rise in volatility with high probability of more downside bias. Failure to reclaim above 1474 and 1492 (200D SMA) levels could trigger further selloff towards 1413-1450 levels. Conversely, a successful reclaim above 1474-1492 would enhance the odds for further technical rebound towards 1500-1521 zones. Meanwhile, we reiterate that the resurgence of Covid-19 cases worldwide should boost the buying interests for technology and healthcare-related stocks. HLIB Research BUY ratings for these sectors are TOPGLOV, HARTA, KOSSAN, PHARMA, FRONTKN, INARI, UNISEM, UWC and MAHSING.

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of the market uncertainty and volatility, we decided to square off our outstanding virtual portfolio stocks i.e. DNONCE (6.1% loss) and MBMR (0.4% gain) on 30 Oct

Source: Hong Leong Investment Bank Research - 2 Nov 2020