MARKET REVIEW

Global. The MSCI Asia ex-Japan index slipped 5.6 pts to 631.1 as chatters of stagflation in the global economic recovery on mounting fears of supply chain disruptions worldwide. Also weighing on investor mood was the impasse over raising the debt ceiling and the resolution of Biden’s USD3.5tri flagship spending bills. The Dow skidded 4.3% or 1517 pts in a tumultuous Sep as a combination of slowing growth, Fed's hawkish tilt at its monetary policy, China headwinds, inflation fears and US debt ceiling deadlock kept investors on the edge. However, the index made a promising debut in Oct, rebounding 482 pts to close at 34326 as positive results from Merck's Covid-19 pill stoked investor optimism.

Malaysia. Tracking external headwinds, KLCI slid 13.3 pts to 1524.5 (-7.5 pts WoW), led by selldown in the telcos, metals, glove and banking stocks. Market breadth remained negative for a 6th session as the losers outnumbered the gainers by 757-to-269 stocks. For the 2nd day in a row, foreigners remain net sellers, offloading RM234m (the largest net selling in two months) whilst local institutions and retailers recorded collective net inflows of RM143m and RM91m, respectively. WoW, foreigner institutions recorded net weekly outflows of RM342m, which were absorbed by local investors and retailers (amounting to RM157m and RM185m, respectively).

TECHNICAL OUTLOOK: KLCI

After rising from a low of 1520 on 22 Sep to a high of 1549 on 30 Sep, strong liquidations by foreigners saw the index tumbling 25 pts in two days to end at 1524 last Friday. Following the decisive fall below 50D SMA near 1537, there could be further consolidation this week. Any break below the 1520 level would push the index lower towards 1500-1510 zones. On the upside, a strong breakout above 1537-1549 overhead resistances bodes well for further advance towards 1558-1576 levels.

MARKET OUTLOOK

After slipping 25 pts in two days, there could be a mild bounce today in tandem with the Wall St rally last Friday but any rebound is likely to be capped near 1537-1549-1558 territory, as investors continue to weigh on multiple external headwinds, a resumption of foreign selling and ahead of the Budget 2022 (29 Oct). Nevertheless, we expect key supports near 1500 levels, underpinned by further reopening of economic sectors given the improvement in the local pandemic situation.

Source: Hong Leong Investment Bank Research - 4 Oct 2021