MARKET REVIEW

Global. Tracking overnight rally in Wall St, Asia Pacific markets were mostly higher with investors balancing recent strong corporate earnings against a wider debate about an imminent stagflation-like backdrop (amid surging energy prices and supply-chain bottlenecks) as well as awaiting China’s 3Q21 GDP today. The Dow jumped 382 pts to 35295 (+549 pts WoW) on another wave of encouraging 3Q21 earnings and a surprise rise in US Sep retail sales. Meanwhile, the backdrop of economic recovery pushed Treasury yields 0.06% higher to 1.57%, underpinning bank stocks due to upbeat quarterly results from major Wall Street banks.

Malaysia. In line with rising ASEAN markets as economic reopening activities gained traction as well as elevated commodities prices, KLCI rose 5.8 pts to 1598.3 last Friday (recouping some of the 7.9-pt loss on 14 Oct). Market breadth was positive as G/L ratio rebounded to 1.5 from 0.85 previously. Trade flows wise, both the local institutions and retailers logged net selling flows of RM221m (5D: -RM846m) and RM82m (5D: -RM79m), respectively. On the other hand, foreigners retained their net buying momentum (+RM303m; 5D: +RM925m) for the 8th consecutive session.

TECHNICAL OUTLOOK: KLCI

In the wake of the grossly overbought stochastic readings after a steep 83-pt rally from a low of 1515 (5 Oct) to 1598 last Friday (+25 pts WoW), the benchmark may start to consolidate its recent gains this week. Although it is too early to call for a top here but we think further upside may be capped at 1605-1623 zones. Key pullback supports are pegged at 1558-1576 territory.

MARKET OUTLOOK

In the wake of resumption in foreign inflows (~70% correlation between KLCI and foreign shareholding) and economic reopening gaining traction with more states are migrating to phase 3 & 4 of NRP, promising vaccination progress (adult population hits 92% vaccination rate on 16 Oct), as well as riding on elevated commodity prices, KLCI is expected to progress further as market risk appetite returns. However, stiff hurdles are situated at 1605 (1 Sep high), while 1623 (26 Apr high) levels should prove to be a tougher upside hurdle ahead of the Budget 2022 (29 Oct) and overbought stochastic reading.

VIRTUAL PORTFOLIO POSITION-FIG1

As the market is hovering at the overbought position, we decided to square off UCHITEC (1.3% loss), MASTER (2.3% gain), GDB (7.5% gain), SCGBHD (12.8% gain) and TUNEPRO (8.5% Gain) on 15 Oct.

Source: Hong Leong Investment Bank Research - 18 Oct 2021