MARKET REVIEW

Global. Asian markets ended lower, taking cue from a decline in Wall St overnight and China launched a new round of graft busting in the finance sector. Sentiment was also spooked by a downgrade by IMF on 2021 global growth to 5.9% (from 6% previously) mainly due to the Delta variant and supply chain bottlenecks. The Dow dropped 117 pts to 34378 as investors grew jittery in the run up to the 3Q21 earnings season amid concerns that prevailing supply chain problems and higher inflation will affect businesses emerging from the Covid-19 pandemic. Market was also cautious ahead of the release of Sep FOMC minutes tonight, which market participants will scour for hints about when the Fed could begin tapering its massive bond-buying program.

Malaysia. Bucking weak regional markets, KLCI jumped 13.1 pts to 1583.9, recording its 6th consecutive winning streak as buying interests rotated to banking and telco stocks following profit taking pullback in O&G and plantation stocks after recent rally. Market breadth turned positive for a 5th day but the G/L ratio weakened to 1.06 from 1.84 Monday. Trade flows wise, foreigners remained major net buyers for a 5th consecutive session (+RM148m; 5D: +RM667m) followed by retailers (+RM29m; 5D: -RM20m). Meanwhile, local institutions were net sellers for the 6th straight session (-RM177m; 5D: -RM647m).

TECHNICAL OUTLOOK: KLCI

Despite early profit taking as KLCI fell 7.1 pts to 1563.7, the benchmark managed to rebound strongly to finish +13.1 pts at 1583.9, surpassing the long awaited 200D MA or 1576 levels. The successful breakout is likely to spur the index to re-challenge 1600-1605- 1623 levels before a pullback occurs (reflected by toppish stochastic reading). Key supports are now pegged at 1544-1558-1576 territory.

MARKET OUTLOOK

On the back of resumption in foreign inflows (~70% correlation between KLCI and foreign shareholding) and economic reopening gaining traction with interstate and overseas travels allowed for the fully vaccinated effective 11 Oct, as well as riding on elevated commodity prices, KLCI is expected to progress further as market risk appetite returns. However, further rally may be capped near 1605-1623 zones (key supports: 1530-1558-1576 zones) as lingering concerns that unpopular taxes could be mooted in Budget 2022 to boost revenue.

Source: Hong Leong Investment Bank Research - 13 Oct 2021