MARKET REVIEW

Asia/US. Asian markets ended mixed with China markets closed for the Golden Week holiday. Meanwhile, elevated inflationary pressures, rising interest rates worldwide and global recession fears kept markets on edge. Investors also assessed the impact of Credit Suisse’s credit default swaps (which offers protection against defaults), skyrocketed to their highest levels since the GFC. After diving 8.8% or 2,785 pts in Sep, Dow staged a 766-pt relief rally to end at 29,491 and the 10Y Treasury yield slid 19 bps to 3.64% amid hopes that signs of slowing economic growth could help keep the Fed from over tightening. On the data front, Sep ISM Manufacturing Index (52.1, Aug 52.8) came in at its slowest pace in over two years while Aug construction spending declined by a larger-than-anticipated 0.7% after falling by 0.6% in July.

Malaysia. Ahead of the tabling of Budget 2023, KLCI staged a long-awaited 3-pt technical rebound after tumbling 117 pts in Sep. Despite the gains, market breadth remained negative with losers leading gainers 530 to 285, while 383 counters remained negative at 0.54 vs 0.77 last Friday. Foreign investors continued to dump RM113m shares (-RM1.65bn for the 14th consecutive session) while both domestic institutions and local retailers registered net buying trades of RM103m and RM10m, respectively.

TECHNICAL OUTLOOK: KLCI

After sliding 117 pts in Sep, KLCI staged a mild 3-pt technical rebound to end at 1,397.6, off intraday low of 1,384.6. Following the positive the Doji and Spinning top patterns, KLCI could stage a downtrend reversal soon. A strong reclaim above 1,400-1,418 hurdles may spur the index higher towards 1,436-1,454 zones. Key supports remained at 1,363-1,380.

MARKET OUTLOOK

As we usher in a new month and the tabling of Budget 2023 on 7 Oct, investors will be hoping for a reprieve following the 7.8% slide in Sep. Taking cue from a 2.7% relief rally from Dow overnight and improving KLCI technical indicators, a rebound could be on the cards to retest immediate 1,400-1,418 hurdles. However, further bounce may be capped at 1,436-1,454 barriers in wake of jittery market backdrops, driven by (i) higher perceived market risk premium for Malaysia in anticipation of an early GE15, (ii) global recession fears, (iii) central banks’ hawkish policies, (iv) heightened geopolitical tensions, (iv) sliding RM (vs USD, 11.6% YTD to 4.6485) and 10Y MGS yield (0.85% YTD to 4.45%), (v) Malaysian corporate earnings and GDP growth risks and (vi) resumption of foreign net selling in Sep (-RM1.73bn, Aug: +RM1.98bn).

Source: Hong Leong Investment Bank Research - 4 Oct 2022