MARKET REVIEW

Global. Asian markets slid in holiday-thinned trading (China, Japan, Taiwan and South Korea markets were closed) and ahead of a week packed with global central bank meetings (from the US, China, Japan, Taiwan, Indonesia and the Philippines) with main focus on asset purchase tapering timeline from the FOMC meeting outcome on 22 Sep. Sentiment was also spooked by growing solvency worries about the beleaguered property developer China Evergrande’s USD305bn debt due this Thursday. Overnight, the Dow dived as much as 971 pts to 33613 before ending -614 pts at 33970 amid fears of contagion from the potential collapse of China's Evergrande could spark a wider liquidity crisis in the real estate sector in China. Sentiment was also cautious ahead of the FOMC meeting, as well as the passing of the US debt limit by 1 Oct to avoid the 3rd partial government shutdown in the past decade.

Malaysia. Tracking Asian and European markets’ rout, KLCI plunged 20.6 pts to 1527.9 pts (its 7th straight decline), led by fierce selling spree in selected heavyweights (3 up and 23 down). Market breadth remained negative as the losers thumped the gainers by 951-to-194 stocks. In terms of fund flows, foreigners net sold RM121m to record its 2nd consecutive day of selling whilst local institutions logged net selling amounting to RM29m, its 18th consecutive day of net outflow totalling RM2.76bn. Meanwhile, local retailers remained the only net buyers amounting to RM139m, registering its 13th consecutive day of net inflow amounting to RM743m.

TECHNICAL OUTLOOK: KLCI

After plunging 77 pts from 1605 to 1528 on 20 Sep and violating multiple key SMAs supports, the odds continue to favour the bears. Current consolidation is likely to prevail for a while but severe downside risk is limited (with revised supports pegged at 1483-1500- 1512 zones) amid grossly oversold slow stochastic indicator. On the upside, only a strong breakout above 1544-1564-1582 hurdles would lift the benchmark out of the range bound consolidation mode to revisit 1605-1615 territory.

MARKET OUTLOOK

Tracking the overnight Wall St slump, investors’ concern over MOF’s new directive for loan moratorium repayments and the possibility of the introduction of a windfall tax in the upcoming Budget 2022 (29 Oct), the odds continue to favour the bears (as foreigners started to liquidate for the 2nd straight day). However, severe downside risk is likely to be supported near 1500 levels amid grossly oversold stochastic reading and ahead of the tabling of 12MP on 27 Sep. 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 (KLCI: - 6.3% YTD; 14.7x CY22E EPS), hopes of easing political risks and confidence in policy continuity, coupled with economic reopening gaining traction.

VIRTUAL PORTFOLIO POSITION-FIG1

We squared off DAYANG (7.1% loss) at RM1.04 yesterday after tumbling below our stop loss levels.

Source: Hong Leong Investment Bank Research - 21 Sept 2021