MARKET REVIEW

Global. Ahead of China’s market reopening today, Asian bourses showed signs of stabilisation from Monday’s rout, as investors are cautiously optimistic that contagion from the embattled China Evergrande would be limited on hopes of possible Beijing rescue. After a 614-pt slump on Monday, the Dow ended -50 pts at 33919 as intra-day technical rebound faded after surging as much as 343 pts to 34313 on technical rebound. Investors are on the edge with worries over the passing of the US debt limit by 1 Oct, the beleaguered Evergrande’s debt crisis and caution ahead of FOMC meeting tonight.

Malaysia. KLCI inched up 2.6 pts at 1530.4 after recording a 70-pt slide in the last 7 trading session. However, market breadth was negative with 538 losers thumped 436 gainers 538 as investors await more clarity on the banks’ earnings impact from loan moratorium repayments and the possibility of the introduction of a windfall tax. Meanwhile, foreigners resumed buying amounting to RM81m after net sold RM194m in the last two days whilst local institutions expanded their net selling to RM160m, logging its 19th consecutive day of net outflow totalling RM2. 92bn. Meanwhile, local retailers continued their net buying amounting to RM799m, recording its 14th straight day of net inflow totalling RM822m.

TECHNICAL OUTLOOK: KLCI

After plunging as much as 84 pts from 1605 to 1521 on 21 Sep, the benchmark staged a minor rebound to close at 1530, forming a small white candlestick. Although the o dds continue to favour the bears, we believe further plunge is unlikely (with revised supports pegged at 1483-1500-1512 zones) amid grossly oversold slow stochastic indicator. On the upside, a strong breakout above 1544-1558-1582 hurdles would lift the benchmark out of the range bound consolidation mode to revisit 1605-1615 territory.

MARKET OUTLOOK

Pending the FOMC meeting outcome and Evergrande’s bond interest payment due tomorrow, we expect Bursa Malaysia to trade cautiously but downside risk is likely to be supported near 1500 levels amid grossly oversold stochastic reading and positive expectation of the 12MP announcement 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: -6.2% YTD; 14.4x CY22E EPS), hopes of easing political risks and confidence in policy continuity, coupled with economic reopening gaining traction.

Source: Hong Leong Investment Bank Research - 22 Sept 2021