MARKET REVIEW

Global. MSCI Asia ex Japan fell 6.3 pts to 647.5 (its 3rd straight decline) as sentiment was dampened by stalling global economic growth amid surging inflation, disappointing results from Apple and Amazon as well as awaiting the official October composite PMI release on 31 Oct (fell to 50.8 from September’s 51.7). The Dow ended at another record closing (+89 pts to 35819), bolstered by the solid growth in US consumer spending, stronger-thanexpected earnings from energy giants Exxon Mobil and Chevron coupled with a slowerthan-expected personal consumption expenditures (PCE) price index.

Malaysia. Ahead of the tabling of Budget 2022 at 4pm on 29 Oct, KLCI eased 4.6 pts to 1562.3 (its 7 th straight decline) as investors digest the announcements in Budget 2022. Market breadth turned positive at 1.02 after hovering between 0.46-0.83 in the last seven sessions. Trade flows wise, foreign institutions (-RM44m; 5D: +RM2m) were the major sellers followed by local institutions (-RM10m; 5D: -RM310m) whilst retailers net bought RM54m (5D: +RM308m) in equities. WoW, both foreigners and retailers continued to register net weekly inflows of RM2m (-RM888m) and RM308m (+RM315m) respectively. On the flip side, domestic institutions’ net selling tumbled 65% to RM310m.

TECHNICAL OUTLOOK: KLCI

Following the Budget 2022 presentation, KLCI fell 4.6 pts to 1562.3 (-25.8 pts WoW) last Friday, underpinned by the bearish 200D MA breakdown below 1572 support and negative technical indicators. We expect further consolidation this week as investors assess the repercussions from the prosperity tax and higher stamp duty rate, with key supports situated at 1548-1515-1500. On the topside, resistance is seen at the 1572, followed by 1590-1605 hurdles.

MARKET OUTLOOK

Following the sharp fall below 200D MA near 1572 and weakening technical readings coupled with the sentiment-damaging prosperity tax and higher stamp duty rate, KLCI may experience a knee-jerk selloff this week. Nevertheless, severe downside risk may be cushioned near 1483-1500-1515 zones (resistances: 1572-1600) by aggressive economic reopening activities with more states are moving to phase 3 & 4 of NRP, high vaccination rate (~96% of the adults had fully vaccinated on 31 Oct) and elevated commodity prices.

Source: Hong Leong Investment Bank Research - 1 Nov 2021