MARKET REVIEW

Global. Asian markets ended higher after Evergrande agreed to settle interest payments on a domestic bond yesterday, and the PBOC pumped further liquidity into the financial system, as well as hopes for signs of intervention by the government to prevent a disorderly default. However, investors remain on edge as Evergrande made no mention of two USD bonds interest payments that are due today and 29 Sep. After plunging 892 pts in the last 4 session, the Dow rallied as much as 521 pts to 34440 before paring off its gains to 338 pts at 34258, after China Evergrande contagion fears eased, and Fed finally provided a clearer bond tapering timeline (may start as soon as November and end in mid-2022) and a rate hike trajectory (could start as early as 2022 instead of 2023).

Malaysia. KLCI ended in the negative territory (-1.4 pts to 1529) after hovering at 1520.7- 1529.8 as investors digested the latest government’s proposals to boost its coffer with capital gain tax and one-off higher tax rate for companies benefited under the Covid-19 environment. Meanwhile, foreigners resumed buying for a 2nd day amounting to RM25m whilst local institutions net sold RM28m, logging its 20th consecutive day of net outflow totalling RM2.9bn. Meanwhile, local retailers continued their net buying amounting to RM3m, recording its 15th straight day of net inflow totalling RM825m.

TECHNICAL OUTLOOK: KLCI

After plunging as much as 85 pts from 1605 to 1520 on 21 Sep, the benchmark staged a minor rebound to close at 1529 yesterday. Although the odds continue to favour the bears, we believe further sharp correction 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

On the back of more clarity from the Fed’s tapering timeline and a general view that the impact of Evergrande’s debt crisis on Bursa Malaysia is limited, we expect the KLCI is likely to find a floor at 1500-1512 levels (Resistances: 1544-1558-1582), underpinned by grossly oversold stochastic reading and positive hopes from the tabling of 12th Malaysia Plan announcement (27 Sep) and Budget 2022 (29 Oct), which are expected to paint a clearer picture of Malaysia’s short-to-medium-term growth prospects and offer various investment opportunities to investors.

Source: Hong Leong Investment Bank Research - 23 Sept 2021