MARKET REVIEW

Global. Despite the strong China Oct trade data and the approval of the USD1.2 trillion infrastructure bill, the MSCI Asia ex-Japan index ended mildly higher (+1.8 pts to 647.2), as investors weighed on the high-profile meeting of China Communist Party’s Central Committee from 8-11 Nov for clues on the future policy as the economy faces challenges from multiple fronts. All three major indices closed at record highs (Dow: +0.3% to 36432; S&P: +0.1% to 4701; Nasdaq: +0.1% to 15982), spurred by cyclical sectors amid optimism over the economy after House Democrats passed the USD1 trillion bipartisan infrastructure package, coupled with robust 3Q21 results season (Refinitiv: over 80% out of the 89% of the S&P 500 reported beat expectations).

Malaysia. After hovering within the 1531-1538 levels, KLCI staged a 3.7-pt oversold rebound to 1535.4, led by selected blue chips such as PETDAG, DIALOG, TM, KLK, IOICORP and HARTA. Market breadth, however, remained negative as the losers outpaced the gainers by 571-to-415 stocks. Turnover slipped to 3.1bn shares worth RM2.1bn against 3.15bn shares valued at RM2.3bn last Friday.

TECHNICAL OUTLOOK: KLCI

After plunging 67 pts in three weeks, KLCI finally staged a long-awaited 3.7-pt technical rebound to 1535.4 yesterday. We expect KLCI to stay trapped in a range bound consolidation mode in the near term as investors continue to assess the repercussions from the prosperity tax and higher stamp duty rate, as well as ongoing Nov reporting season. Stiff hurdles are pegged at 1545-1562 gap (1 Nov) and 1570 (200D MA) whilst crucial downside supports are situated at 1500-1515 territory.

MARKET OUTLOOK

As investors continue to assess the repercussions from the one-off prosperity tax and higher stamp duty rate, 3Q21 GDP data (on 12 Nov) and Nov reporting season, the overall KLCI trend could remain choppy (key supports: 1483-1500-1515 zones). Meanwhile, investors are also closely monitoring the Malacca state election on 20 Nov, as the outcome will affect the position of the current government and its prospects in the next GE15. Nevertheless, as technical indicators are on the mend, KLCI may stage a technical rebound (resistances: 1545-1562-1570) in the coming days, boosted by the aggressive economic reopening activities with more states are moving to phase 4 of NRP, high vaccination rate (75% of the total population fully vaccinated on 8 Nov) and firm commodity prices.

Source: Hong Leong Investment Bank Research - 9 Nov 2021