MARKET REVIEW

Global. Optimism over robust US corporate earnings provided a boost to Asian markets in early trades but the gains tapered off towards closing, pending the key US FOMC decision tomorrow and lingering concerns about China’s economic outlook. Wall St ended at fresh record highs overnight, as investors digested by a slew of bullish 3Q21 earnings updates ahead of the FOMC meeting outcome and a key Oct jobs data this Friday. The S&P 500 rose 0.37% to a record high of 4631 whilst the Dow gained 0.39% to a record of 36052. Meanwhile, the Nasdaq climbed 0.34% to another record of 15650.

Malaysia. After sliding 31.4 pts on 1 Nov as investors sparked a knee-jerk selldown on KLCI following the unexpected prosperity tax and higher stamp duty measures, the benchmark staged a 6.7-pts technical rebound to 1537.6 (1st gain in 9 trading sessions) amid bargain hunting activities on the plantation, banking and telco stocks. Market breadth was positive with 629 gainers outpaced 404 losers. Trade flows wise, local institutions (- RM92m; 5D: -RM590m) continue their net selling whilst foreigners (+RM60m; 5D:+RM36m) and retailers (+RM32m; 5D: +RM554m) were major net buyers in equities.

TECHNICAL OUTLOOK: KLCI

After plunging 75 pts in the last 8 sessions, KLCI finally staged a 6.7-pt relief rebound to close at 1537.6. For the next 2-3 days, we expect KLCI to remain choppy as investors continue to assess the repercussions from the prosperity tax and higher stamp duty rate, impending FOMC and OPEC+ meetings’ outcome. Overnight record closing on US major indices and a bullish Harami pattern on KLCI may encourage further oversold rebound but we see stiff hurdles near 1545-1562 gap (1 Nov) and 1572 (200D MA). Meanwhile, downside supports are situated at 1500-1515 territory.

MARKET OUTLOOK

Overnight record closing on US major indices and a bullish Harami pattern on KLCI may encourage further oversold rebound towards 1545-1562 levels (gap down on 1 Nov). However, the overall trend would remain choppy as investors continue to digest the prosperity tax and higher stamp duty rate measures, upcoming FOMC (4 Nov) and OPEC+ (4 Nov) meetings’ outcome as well as the start of Nov reporting season. Conversely, severe downside risk may be cushioned near 1483-1500-1515 zones 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 3 Nov) and elevated commodity prices.

Source: Hong Leong Investment Bank Research - 3 Nov 2021