MARKET REVIEW

Global. Asian markets ended mixed ahead of US inflation data due later in the evening. Sentiment was also dampened by sharp falls in the China and Hong Kong bourses, dragged by real estate and financials after the country’s most-indebted developer, Evergrande warned of a risk of a cross-default. Overnight, the Dow rallied as much as 121 pts to 34990 amid signs of easing inflation. However, the benchmark wiped out the early gains to close –292 pts at 34577 amid worries of cooling US economy owing to the advent of the highly contagious Delta Covid-19 variant and the prospect of a corporate tax hike from 21% to 26.5% as part of the USD3.5trn infrastructure bill.

Malaysia. KLCI fell for the 4th straight day (totalling 42.1 pts or 2.6%) to end -14.6 pts at 1555.5, weighed by sliding banking, glove, metals and utilities stocks as investors gauged the possibility of a windfall tax being levied on corporate Malaysia and news that the MOF has instructed banks to work on exempting loan moratorium interest payments (Oct-Dec 21) for B50 recipients. In terms of fund flows, foreign institutions and local retailers remained as the major buyers amounting to RM63m (5D: RM347m) and RM60m (5D: RM279m) respectively whilst local institutions logged net selling amounting to RM123m, its 15th consecutive day of net outflow (5D: -RM688m).

TECHNICAL OUTLOOK: KLCI

The KLCI dived as much as 21.2 pts to 1548.9 before paring the losses to -14.6 pts at 1555, a tad below the 100D SMA near 1558. We expect the index to extend its profit taking consolidation, with major supports at 1533-1543. The topside should see 1583 (200D SMA) as the immediate barrier followed by the 1600-1605 territory. In a nutshell, KLCI’s near term trend would remain choppy, oscillating in between 1543 and 1583 range.

MARKET OUTLOOK

In this holiday-shortened week (Malaysia Day holiday: 16 Sep), KLCI (YTD: -4.4%; 14.7x CY22 P/E) is expected to lock in a consolidation mode after rallying from 1483 YTD low, on the back of rising risk aversion over the speculation of windfall tax implementation in the upcoming Budget 2020 on 29 Oct, a potential economic slowdown in the US and China, coupled with the Fed’s tapering timeline. However, we expect the market to hold up (supports: 1533-1550) as risk appetite resurfaced on hopes of easing political risks, economic reopening gaining tractions (as ~54% of the total population has been fully vaccinated), underpinned by the sustained influx of foreign funds (+RM1.85bn since end July). For investors that missed out on the “mini Aug rally” (+7.1% MoM), we reckon the current market weakness could be the next boat to catch on the broader re-opening theme play.

VIRTUAL PORTFOLIO POSITION-FIG1

In the wake of the market uncertainty, we decided to square off FOCUSP (8.8% gain) on 14 Sep.

Source: Hong Leong Investment Bank Research - 15 Sept 2021