MARKET REVIEW

Global. MSCI Asia ex-Japan inched up 2 pts to 650 as investors weighed on the impact of China’s latest regulatory tightening on the casinos in Macau, the prospect of Fed tapering timeline, alongside fears that embattled property developer China Evergrande’s default would trigger a broad contagion and heighten credit risk. Ahead of the quadruple witching last Friday, the Dow slid as much as 232 pts before trimming its losses to 166 pts at 34585 amid corporate tax hike worries, the highly contagious Delta Covid-19 variant and possible shifts in the Fed's timeline for tapering asset purchases during the 21-22 Sep FOMC meeting.

Malaysia. KLCI slipped for the 6th consecutive day to end -6.8 pts at 1548.5 last Friday, weighed down mainly by glove, banking and plantation stocks as investors remained wary over the government’s new proposal for loan moratorium repayments and the possibility of the introduction of a windfall tax. In terms of fund flows, foreigners net sold RM73m after registering 4 consecutive days of net inflow amounting to RM280m whilst local institutions logged net selling amounting to RM9m, its 17th consecutive day of net outflow totalling RM2.75bn. Meanwhile, local retailers remained the sole net buyers amounting to RM82m, recording its 12th consecutive day of net inflow amounting to RM264m.

TECHNICAL OUTLOOK: KLCI

After plunging 57 pts from 1605 to 1548 on 17 Sep and violating multiple key SMAs supports, the odds continue to favour the bears, with key supports pegged at 1533-1546 zones. Current consolidation is likely to prevail for a while but severe downside risk is limited amid grossly oversold slow stochastic indicator. On the upside, only a strong breakout above 1556-1564-1782 hurdles would lift the benchmark out of the consolidation mode to revisit 1605-1615 territory.

MARKET OUTLOOK

On the back of volatile external markets and KLCI recent bearish breakdown below m ultiple key SMAs supports, the odds continue to favour the bears but the downside risk is likely to be limited amid grossly oversold stochastic reading (key supports 1523 -1533). For investors that missed out on the “mini Aug rally” (+7.1% in Aug), we reckon that current market weakness could be the next boat to catch on the broader re-opening theme play, underpinned by Bursa Malaysia’s laggard status (-4.9%; 14.6x CY22E EPS), hopes of easing political risks and confidence in policy continuity, coupled with economic reopening gaining traction.

Source: Hong Leong Investment Bank Research - 20 Sept 2021