MARKET REVIEW

Asia/US. In line with Wall Street’s rout, MSCI All Countries Asia Pacific index fell 0.45% to 147.33, taking cue from Fed’s growing hawkish tone and pessimistic outlook for the US economy. Dow slipped 107 pts to 30,076 (5th drop out of six trading days) amid heightened worries that the Fed’s ultra-hawkish stance and a flurry of global central bank aggressive policy decisions will push the global economy into a recession. Meanwhile, the yields on the 10Y (+0.18% to 3.71%) and 2Y (+0.09% to 4.12%) Treasury notes notched fresh multiyear highs, hitting their highest levels since Feb 2011 and Oct 2007, respectively. Overall, surging yields and the ongoing curve inversion continue to dampen risk appetite on growth stocks and heighten recession fears ahead.

Malaysia. Taking cue from US and regional markets’ slump coupled with persistent net selling by foreigners (-RM587m for 7th straight session), KLCI fell 8 pts to 1,439.2, recording its sixth decline out of seven trading days, led by losses in PMETAL, IHH, PCHEM, CIMB and PBBANK. Market breadth remained negative at 0.83 from 0.56 a day ago.

TECHNICAL OUTLOOK: KLCI

The bears are in total control after violating multiple key supports to record its sixth decline out of seven trading days. We reiterate that an extended downward consolidation may prevail within our envisaged 1,436 (76.4% FR), 1,418 and 1,408 (25M low) supports unless KLCI could swiftly reclaiming above 1,454 (61.8% FR), 1,468 (50% FR) and 1,485 (downtrend line) hurdles.

MARKET OUTLOOK

On the back of multiple headwinds including aggressive tightening policies by global central banks, elevated inflation, heightened geopolitical tensions, global recession fear, sliding RM (vs USD, +9.6% YTD to 4.568), soaring 10Y MGS yield (+0.64% YTD to 4.24%), GE15 fluidity, and resumption of foreign net selling in Sep (-RM587m, Aug: +RM1.98bn), KLCI is expected to continue its downward consolidation. Any technical rebound from an oversold position in anticipation of a market-friendly Budget 2023 (tabling on 7 Oct) is likely to be brief, capping at stiff hurdles near 1,454-1,468-1,482 zones whilst key supports are pegged at 1,408-1,418-1,435 levels.

Source: Hong Leong Investment Bank Research - 23 Sept 2022