MARKET REVIEW

Global. The MSCI Asia ex Japan eased 2.5 pts to 653.4 amid renewed US-China geopolitical tensions after Washington revoked authorisation for China Telecom’s US subsidiary to operate in the US. Sentiment was also dampened by falling commodity prices (after China plans to cap a key coal price) and Evergrande’s coupon payment deadline today. Shrugging off the downbeat US 3Q21 GDP, Nasdaq rallied 1.4% to a close at a record of 15448 whilst the Dow jumped 0.7% to 35730, led by Apple, Amazon Tesla, JP Morgan, Goldman Sachs and as well as solid results from Caterpillar and Merck. However, the US Tech futures dropped 95 pts (as at 8am) following disappointing earnings reports from Apple and Amazon.

Malaysia. Ahead of the tabling of Budget 2022 today, KLCI slid 16.2 pts to 1566.9 (its 6th straight decline), in line with sluggish regional markets. Market breadth remained negative as G/L ratio fell for the 7th straight session to 0.67. Trade flows wise, foreign institutions (- RM52m; 5D: +RM137m) were the major sellers followed by local institutions (-RM26m; 5D: -RM390m) whilst retailers continued to log net buying flows of RM78m (5D: +RM253m).

TECHNICAL OUTLOOK: KLCI

Following the bearish 200D MA breakdown below 1573 support and deteriorating technical indicators, a deeper pullback is likely to take place towards 1549-1561 levels in the next few days. On the topside, resistance is seen at the 1573, followed by the strong resistance at 1590-1605.

MARKET OUTLOOK

Following the sharp fall below 200D MA near 1573 and weakening technical readings coupled with fresh US-China trade tensions, a deeper pullback is likely to prevail in the near term with major supports at 1549-1561 territory. 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, high vaccination rate (~95% of the adults had fully vaccinated on 28 Oct), elevated commodity prices and mildly positive expectations of another expansionary Budget 2022 to rebuild Malaysia’s economy after almost two years of economic and health crises.

Source: Hong Leong Investment Bank Research - 29 Oct 2021