MARKET REVIEW

Global. Despite China’s unexpected suspension of Ant Group’s USD37bn listing on 5 Nov, Asian markets were mostly higher made by cautious gains on technical rebounds as investors cheered strong factory output data from major economies and hopes of a US election win by Biden is expected to espouse a less combative stance on China and steadier foreign and trade policy overall that are supportive for Asia's trade-reliant economies. Overnight, the Dow rallied 555 pts to 27480 as investors hope that Biden’s victory would bring a surge in federal spending to boost stimulus spending and be less - combative on trade, easing the hit from higher taxes and plans to expand public health care coverage, given that the incumbent held a lead in national polling over Trump.

Malaysia. KLCI shed 5 pts at 1461.5 as investors weighed BNM’s decision to maintain interest rates ahead of the tabling of Budget 2021 (6 Nov) and US presidential election outcome coupled with unabated Covid-19 cases and clusters in Malaysia. Despite the benchmark’s decline, market breadth was positive as 669 gainers outpaced 384 losers with a total 6.4bn shares traded valued at RM3. 3bn, driven by strong interest on FBMSCAP (+2.2%) and FBMACE (+2.2%) counters. Foreign investors net sold RM134m in equities for the 4th straight sessions whilst local institutional investors and retailers net bought RM49m and RM85m shares, respectively.

TECHNICAL OUTLOOK: KLCI

On the back of heightened external and domestic headwinds, KLCI plunged as much as 166 pts from a YTD high of 1618 (29 July) to a low of 1452 before narrowing the losses to 157 pts or 9.7% at 1461 yesterday, below the bearish Head & Shoulder (H&S) neckline at 1474 (10 Sep). Unless swiftly reclaiming above 1474 and 1491 (200D SMA) overhead resistances, KLCI is still tilted to the downside to retest 1450, 1428 (20 Apr high) and 1413 (50% FR) levels. On the contrary, a successful reclaim above 1474-1491 barriers would enhance the odds for a further technical rebound towards 1502 (30D SMA), 1511 (50D SMA) and 1521 (23.6% FR) levels

MARKET OUTLOOK

We continue to expect further volatility this week ahead of the US election results and tabling of Budget 2021 (6 Nov) as well as the ongoing Nov reporting season. Moreover, more targeted lockdowns amid spiking Covid-19 local transmissions and clusters in Malaysia would dampen our expectations for a more meaningful 2H20 economic and corporate earnings recovery. Key supports are pegged at 1450 -1428-1413 whilst resistances are situated at 1474-1491-1502 levels. On stock selection, HLIB Institutional Research reiterates a BUY rating on FRONTKN with TP at RM4.10 (+16% upside). We like Frontken for its multi-year growth ahead on the back of (1) sustainable global semiconductor market outlook, (2) robust fab investment, (3) unique exposure to leading-edge technology semiconductor front tend supply chain, (4) strong balance sheet (net cash of ~RM263m or 25 sen per share) to support its Taiwan expansion and 5) serving the niche market with high entry barrier. Technically, FRONTKN’s uptrend remains relatively intact barring a decisive breakdown below RM3.42 (support trendline from 11 Sep low at RM3.04). A decisive breakout above RM3.63 (10D SMA) will lift the stock from ongoing sideways consolidation mode higher towards RM3.79 (upper BB) and our LT objective at RM4.00 levels. Key supports are RM3.42 and RM3.34 (100D SMA). Cut loss at RM3.31

Source: Hong Leong Investment Bank Research - 4 Nov 2020