MARKET REVIEW

Asia/US. MSCI All Countries Asia Pacific index tumbled 1.15% to 150.3 (-2.6% WoW) as investors fretted about skyrocketing inflation, aggressive rate hikes in decades and rapid economic slowdown globally, coupled with FedEx’s withdrawal of its full year guidance and cost cutting measures amid “significantly worse” global economic trends. Ahead of the crucial FOMC’s decision on 22 Sep (Malaysian time 2am), Dow plunged as much as 412 pts following World Bank’s warning that the world may be edging toward a global recession in 2023 and a string of financial crises in emerging market and developing economies due to simultaneous rate hikes, as well as FedEx’s bearish outlook guidance. However, the losses were trimmed to 139 pts at 30,822 as the US consumer sentiment index hit a 5M high of 59.5 in Sep (Aug: 58.2) whilst expectations for 1Y/5Y inflation expectations hit their lowest level since Sep 21.

Malaysia. Tracking sluggish regional markets and ahead of the Malaysia Day holiday, KLCI erased 1.1 pts to 1,467.3. WoW, the benchmark tumbled 29.2 pts in a choppy performance, swinging from a high of 1,501.9 on Monday to a low of 1,466.3 on Thursday. Against a negative market breadth backdrop in three of the four trading days, daily average turnover on the local stock exchange stood at 2.6bn shares valued at RM1.9bn, about 15% and 21% higher vs the prior week amid the resumption of foreign net outflows.

TECHNICAL OUTLOOK: KLCI

Taking cues of Wall St rout and Malaysia Day holiday, KLCI extended its profit taking consolidation to finish -1.1 pts at 1,467.3 on 15 Sep, registering its 3rd straight fall. Following the uptrend line and multiple key MA supports breakdown, KLCI is expected to continue its consolidation for a while, with lower supports pegged at 1,455 (61.8% FR) and 1,436 (76.4% FR) levels. Meanwhile, stiff hurdles are placed at 1,482 (38.2% FR), 1,500 and 1,527 (200D MA) levels.

MARKET OUTLOOK

Tracking the sliding USDMYR (+0.85% wow to 4.535), soaring 10Y MGS yield (+0.1% wow to 4.13%), GE15 fluidity (PM said on 17 Sep that he would dissolve the Parliament soon), a resumption of foreign net selling in Sep and ahead of the crucial FOMC’s decision, KLCI is expected to remain choppy (supports: 1,436-1,455; resistances: 1,482-1,500) this week. Undoubtedly, the focus of the week will be on the FOMC’s decision, with traders have fully priced in a 75 bps hike (anything > 75bps hike will be a negative surprise) and there will be keen interest on possible insights into the quantum and timing of future rate hikes . According to FedWatch Tool, traders are pricing in a 55% probability of a 75bps hike in Nov meeting and 42% bet of a 25bps hike for the Dec meeting.

Source: Hong Leong Investment Bank Research - 19 Sept 2022