MARKET REVIEW

Global. Despite FDA’s approval of the Gilead Sciences’ antiviral remdesivir for Covid-19 treatment, Asian bourses ended mixed following weaker-than-expected Intel 3Q20 results and US lawmakers continued to haggle over a covid-19 aid package. Last Friday, Dow tumbled as much as 214 pts to 28150 following disappointing results from Intel and American Express coupled with Kudlow’s pessimistic outlook for a long-awaited Covid-19 stimulus package. However, losses were reduced to 28-pt at 28335 (-271 pts or -0.9% WoW) amid the strong service and manufacturing PMI indexes in Oct and Pelosi’s optimism of a coronavirus relief can still be reached before the 3 Nov election.

Malaysia. KLCI slipped 4.2 pts to 1494.6 (-9.2 pts WoW) last Friday, taking cues from worries of the economic impact amid spiking Covid-19 cases and clusters in Malaysia coupled with swirling rumours that PM may declare a state of emergency after meeting with the King at 5pm. Across Bursa Malaysia, 6.93bn securities were traded for RM4.1bn while market breadth was bearish with 311 gainers vs 894 losers. Last Friday, foreign investors net sold RM37m shares whilst local retailers (+RM12m) and local institutional investors (+RM25m) were the main buyers. WoW, local retailers net bought RM446m shares whilst local institutional and foreign investors net sold RM232m and RM214m equities, respectively.

TECHNICAL OUTLOOK: KLCI

In the short term, KLCI may continue to engage in a tug-of-war between the bulls and bears. 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 1522 (50D SMA) and 1506 (uptrend line) supports to end at 1494.6 (or 200D SMA) last Friday. Violating this major support would reignite a risk-off mode, potentially pushing the index lower towards 1474 (10 Sep low), 1461 (50% FR) and 1450 levels. On the upside, stiff overhead resistances are situated at 1506 and 1522 levels. Crossing these barriers will lift the index higher towards 1541 (17 Sep high) and 1564 (90W SMA) levels next

MARKET OUTLOOK

Following Agong’s decree that there is no need, for now, to enforce a state of emergency in any part of the country, KLCI may stage a mild rebound today with upside capped near 1506 (uptrend line from 1474) and 1522 (50D SMA) while supports are pegged at 1485- 1474-1461 levels. Overall, the index is likely 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 an exponential surge of coronavirus cases worldwide as the winter season begins in the Northern Hemisphere. In Malaysia, possible CMCO extensions from 27 Oct especially in the Klang Valley (contributed over 41% to national GDP) amid spiking Covid-19 local transmissions and clusters would dampen our expectations for a 2H20 economic and corporate earnings recovery. Stocks wise, active buying interest in technology and healthcare-related stocks are deemed to benefit from a prolonged virus pandemic. HLIB’s top picks are TOPGLOV, HARTA, KOSSAN, MAHSING, PHARMA, FRONTKN, INARI and UWC

Source: Hong Leong Investment Bank Research - 2 Nov 2020