MARKET REVIEW

Global. Asian markets ended mixed with an overhang from multiple types of uncertainty amid Evergrande’s financial woes, power crunch and high inflation but the latest bullish US corporate earnings helped to soothe cautious sentiment. On the back of better -than expected 3Q21 earnings, the Dow rose as much as 213 pts to an all-time high of 35670 before paring its gains to 152 pts at 35609, as investors weighed on the latest compendium of Fed reports that significant increases in prices and wages even as US economic growth decelerated to a “modest to moderate” pace in Sep and early Oct.

Malaysia. Tracking overnight gains on Wall St, elevated crude oil and FCPO prices coupled with economic reopening optimism, KLCI rose as much as 7 pts to 1613 but profit taking saw the index ending flat at 1606.3. Market breadth was negative as 618 losers edged 512 gainers. Trade flows wise, local institutions were the sole net sellers (11th day of net selling) with net outflows of RM244m (5D: -RM974m). Foreigners remained as major net buyers for the 10th straight sessions (+RM242m; 5D: +RM1125m) whilst local retailers turned net buyers (+RM2m; 5D: -RM151m) after logging RM153m outflow in four days.

TECHNICAL OUTLOOK: KLCI

As anticipated, KLCI faced resistance near our envisaged 1614-1623 hurdles before ending flat at 1606 yesterday after rallying from 1515 (Oct 5 low). In the wake of a steeply overbought stochastic reading, KLCI may consolidate its gains in the near term. Although it is too early to call for a top here but we think further upside may be capped at 1614-1623- 1642 zones. Key pullback supports are pegged at 1574-1590 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 (94% of the adults had fully vaccinated on 19 Oct), as well as riding on elevated commodity prices, KLCI is expected to progress further as market risk appetite returns. However, the 1614-1623-1642 levels may act as key upside hurdles ahead of the Budget 2022 (29 Oct) and steeply overbought stochastic reading.

Source: Hong Leong Investment Bank Research - 21 Oct 2021