MARKET REVIEW

Asia/US. Asian markets were in a sea of red amid nagging worries about rising global interest rates and a potential recession, underpinned by hawkish comments from Fed officials James Bullard and Neel Kashkari, who warned that the US faced a serious recession risk, and that more interest rate hikes were likely in order to tame stubborn inflation. After diving 1,884 pts over the last 6 consecutive sessions, Dow staged a 548-pt relief rally to end at 29,683, boosted by the BOE’s decision to buy long-dated government bonds to stabilize its financial markets. The move stabilized the British pound, which became the centre of attention in markets this week as it tumbled to a record low against the USD. Corresponding, US 10Y and UK 10Y Treasury yields tumbled 21 bps and 50 bps to 3.73% and 4.0%, respectively.

Malaysia. In line with regional markets’ slump, KLCI slipped 9 pts to 1,401.9 following persistent foreign net selling, Malaysian corporate earnings and GDP growth risks amid hyper-inflationary cycle and rising interest rates coupled with higher perceived market risk premium for Malaysia due to upcoming GE15. Market breadth was bearish, tumbling to 0.36 from 1.09 a day earlier.

TECHNICAL OUTLOOK: KLCI

The bears are in total control after violating multiple crucial supports to record its 10th decline out of 11 trading days. We reiterate that an extended downward consolidation may prevail towards our envisaged 1400 psychological support 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 towards 1,380 (123.6% FR) and 1,363 (138.2% FR) territory.

MARKET OUTLOOK

After sliding 13.4% from 52W high of 1,620, KLCI may experience an oversold rebound today, taking cues from Dow’s 1.9% relief rally overnight, potential end-3Q22 window dressing and market-friendly Budget 2023 (tabling on 7 Oct). However, any rebound may be capped near 1,436-1,454-1,482 hurdles (supports: 1,363-1,380-1,400) amid lingering headwinds including: (i) global recession fears, (ii) central banks’ hawkish tone, (iii) geopolitical tensions, (iv) sliding RM (vs USD, 11.1% YTD to 4.63) and 10Y MGS yield (+0.82% to 4.42%), (v) GE15 fluidity, and (vi) fierce foreign net selling in Sep (-RM1.39bn, Aug: +RM1.98bn).

Source: Hong Leong Investment Bank Research - 29 Sept 2022