MARKET REVIEW

Global. Asian markets ended lower as sentiment was dampened by Modern Land (another China developer) defaulted on a payment, adding to concerns about spiralling effects of the indebted real estate sector in China, as well as worsening Covid-19 situation in China. After hitting an all-time high of 35835 on 26 Oct, the Dow slid 266 pts or 0.7% to 35490 whilst the Nasdaq ended flat from an intraday rally (driven by strong Microsoft and Alphabet results), as the bullish 3Q21 earnings season momentum started to fade amid lingering worries over supply-chain bottlenecks, labour shortages, high inflation and Fed’s imminent tapering.

Malaysia. In the absence of fresh impetus, KLCI eased 1.1 pts to 1583.1 to record its 5th straight decline. Market breadth remains negative as G/L ratio fell for the 6th straight session to 0.61. Trade flows wise, local institutional funds remained as major net sellers (- RM132m; 5D: -RM476m) whilst the foreigners and retailers continued to log net buying flows of RM58m (5D: +RM206m) and RM74m (5D: +RM270m), respectively.

TECHNICAL OUTLOOK: KLCI

KLCI is likely to extend its overbought consolidation amid lack of fresh catalysts to capture buying interest coupled with the existence of negative technical signals after sitting on cumulative gains of 68 pts since its run-up from a low of 1515 (5 Oct). Stiff resistances are pegged at 1600-1613-1623 zones whilst key supports are situated at 1561-1573 territory.

MARKET OUTLOOK

Ahead of the upcoming Budget 2022 presentation on Friday, profit-taking temptations may continue to prevail on the Bursa Malaysia in the absence of fresh buying vibes after rallying from 1515 low. Nevertheless, severe downside risk is cushioned (supports: 1560-1573; resistances: 1600-1613) by aggressive economic reopening activities with more states are moving to phase 3 & 4 of NRP, the return of foreigners (~69% correlation between KLCI and foreign shareholding), high vaccination rate (~95% of the adults had fully vaccinated on 27 Oct) and riding on elevated commodity prices.

Virtual Portfolio- Fig 1

Tracking overnight slide on Wall St and ahead of the upcoming Budget 2022 presentation, we decided to square off EDGENTA (+6.1% gain), GENM (+6.6% gain), DNEX (2.5% loss) and KRONO (2.4% loss) to reduce market exposure risk.

Source: Hong Leong Investment Bank Research - 28 Oct 2021