MARKET REVIEW

Asia/US. MSCI All Countries Asia Pacific index tumbled 2.2% to 141.9 (its 9th decline out of 10 days), as investors recalibrated lingering risks from elevated inflation, aggressive rates hike, sliding emerging market currencies (vs USD) and China rapid slowdown. Dow plunged 330 pts to 29,261 (-20.8% from all-time high 36,952), dampened by hawkish remarks from Fed officials from Boston and Atlanta that additional rate hikes are needed to rein in stubbornly high inflation and cautioned the process will require some job losses and economic pains. Further rattling sentiment was a turmoil in currency markets (Dollar index surged 1% to 20Y high) whilst 10Y Treasury yield ballooned 24bps to 12Y high at 3.93%.

Malaysia. Wall St slump and regional markets’ rout coupled with persistent net outflows by foreigners (-RM1bn for 9th straight session) dragged KLCI to record its 4th consecutive decline (-12 pts to 1,413, -12.8% from 52W high of 1,620), led by losses in MAYBANK, KLK, PBBANK, CIMB, MAXIS and IOICORP. Market breadth slid to 0.21, the 2nd lowest YTD (13 June: 0.13).

TECHNICAL OUTLOOK: KLCI

KLCI is now firmly trapped in a downtrend channel, as the bears are in total control after violating multiple crucial supports to record its 8th decline out of 9 trading days. We reiterate that an extended downward consolidation may prevail towards our envisaged 1,400 psychological support this week, before staging an oversold rebound. Major resistances are pegged at 1,436 (76.4% FR), 1,454 (61.8% FR) and 1,482 (38.2% FR). Conversely, a decisive breakdown below 1,400 may induce further selloff toward 1,363 (138.2% FR) and 1,380 (123.6% FR).

MARKET OUTLOOK

Following a 12.8% selloff from 52-week high of 1,620, any technical rebound from an oversold position in anticipation of potential 3Q22 window dressing and market-friendly Budget 2023 (tabling on 7 Oct) is likely to be brief, capping at stiff hurdles near 1,436- 1,454-1,482 zones whilst key supports are pegged at 1,363-1,380-1,400 levels. Overall, Bursa Malaysia will probably remain under pressure in the short term, dampened by lingering headwinds including: (i) global recession fears, (ii) central banks’ hawkish policies, (iii) heightened geopolitical tensions, (iv) sliding RM (vs USD, 10.4% YTD to 4.604), (v) GE15 fluidity, (vi) Malaysian corporate earnings and GDP growth risks and (vii) resumption of foreign net selling in Sep (-RM1.1bn, Aug: +RM1.98bn).

VIRTUAL PORTFOLIO (FIG1)

In the wake of a bearish market sentiment, we had squared off our positions on ICON (9.1% loss), ARMADA (9.5% loss) and EVERGRN (5.4% loss) yesterday.

Source: Hong Leong Investment Bank Research - 27 Sept 2022