MARKET REVIEW

Global. Tracking overnight’s rout in Wall St, MSCI Asia ex-Japan index fell 1.8 pts to 626.5 amid persistent worries on high inflation, a slowing economy, the US debt ceiling impasse and Evergrande’s debt woes. After a 324-pt selloff on Monday, the Dow surged as much as 488 pts to 34490, boosted by a strong US services activity in Sep and dip-buying in financials and technology stocks. However, the gains were reduced to +311 pts at 34315 as caution dominates ahead of the Sep jobs data on Friday and nagging concerns about a potential US government debt default as a key deadline looms on 18 Oct.

Malaysia. Bucking an overnight slump in Wall St, KLCI gained 8 pts to 1530.4 after falling 25.2 pts in three days, led by bargain hunting in plantation, banking and O&G heavyweights. However, market breadth remained negative for the 8th session as losers edged gainers by 515-to-469 stocks. For a 4th straight session, foreigners remained net sellers (-RM10m; 5D: -RM516m) whilst local institutions also net sold RM14m (5D: RM398m). The retailers stayed the largest net buyers amounting to RM24m (5D: RM118).

TECHNICAL OUTLOOK: KLCI

After rising from a low of 1483 on 4 Aug to a high of 1605 on 1 Sep, strong profit taking pullback saw the index tumbling 4.7% or 75 pts to end at 1530 yesterday. Following the decisive fall below the 50D SMA (near 1537) and support trendline (near 1533), the index is likely extend its consolidation mode this week. A breakdown below 1500-1510 supports would witness the index to revisit 1483 zones. On the upside, the index must swiftly reclaim above the 1533-1537 resistances to resume its upward momentum towards 1544-1558- 1576 levels.

MARKET OUTLOOK

In the wake of multiple external headwinds, renewed foreign liquidations and investors’ concern on possible new taxes in Budget 2022, KLCI is likely to experience choppy sessions ahead. Nevertheless, we expect strong support near 1500 levels, underpinned by the further reopening of economic sectors given the improvement in the local pandemic situation. Key resistances are located at 1537-1544-1558 levels.

Source: Hong Leong Investment Bank Research - 6 Oct 2021