MARKET REVIEW

Asia/US. After tumbling 5.8% in the last four days, MSCI All Countries Asia Pacific index inched up 0.2% to 142.2 as the dollar and US 10Y Treasury yield retreated from multi decades high and growing expectations of more stimulus measures by the Chinese government to rejuvenate an ailing economy. After fluctuating within a 701-pt band, Dow ended -126 pts to 29,135 (-21.1% from all-time high 36,952) in a choppy trade, as investors weighed a slew of economic data (eg Aug durable goods orders, Sep consumer confidence index, Aug new home sales etc) and the latest commentaries from the Fed officials. Fed Presidents Bullard and Kashkari said inflation is a “serious problem” that the central bank must address and the need for convincing evidence of falling inflation before cutting rates. In contrast, Charles Evans signalled concern over the fast pace of rate hikes by the central bank.

Malaysia. After rising as much as 7.2 pts in early trade, KLCI succumbed to profit taking, ending -2.2 pts at 1,410.9 (its 5th straight decline), led by persistent foreign outflows (10th

consecutive net selling valued at RM840m). Despite the index decline, market breadth recovered to 1.09 from 0.21 (the 2nd lowest YTD), supported by a 7% and 4% rise in daily traded volume and value at 2.28bn shares valued at RM1.92bn, respectively.

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 9th decline out of 10 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

After plunging 12.9% from 52W high of 1,620, KLCI may experience an oversold rebound in anticipation of potential 3Q22 window dressing (this Friday) and market-friendly Budget 2023 (tabling on 7 Oct). However, the rebound may be capped at stiff hurdles near 1,436- 1,454-1,482 zones (key supports: 1,363-1,380-1,400), dampened by lingering headwinds including: (i) global recession fears, (ii) central banks’ hawkish policies, (iii) heightened geopolitical tensions, (iv) sliding RM (vs USD, 10.6% YTD to 4.611) and 10Y MGS yield (+0.78% to 4.38%), (v) GE15 fluidity, (vi) Malaysian corporate earnings and GDP growth risks and (vii) resumption of foreign net selling in Sep (-RM1.19bn, Aug: +RM1.98bn).

Source: Hong Leong Investment Bank Research - 28 Sept 2022