MARKET REVIEW

Asia/US. Asian markets ended higher, taking cues from Wall St rally overnight on hopes of Fed pivot amid weakening US economy, while the partial withdrawal of the UK's contentious tax plan and a lesser than expected rate hike by Reserve Bank of Australia also aided sentiment. After diving 8.8% or 2,785 pts in Sep, Dow ended higher for a 2nd day (+825 pts to 30,316) riding on the retreat in US 10Y Treasury yield and Dollar index from multi-year highs, in anticipation that a sluggish August US job openings report (sank to a 14M low) could help keep the Fed from over tightening. Meanwhile, energy stocks rallied ahead of the OPEC+ meeting today, betting that an output cut of more than 1m bpd to counter recent sharp correction in oil prices.

Malaysia. Tracking relief rallies from Wall St and regional markets, KLCI surged 11.7 pts to 1,409.4 (2nd consecutive gain), led by bargain hunting activities on MAXIS, CIMB, MAYBANK, PETDAG, MRDIT and MISC. Market breadth rebounded to 2.03 (the highest since 2.26 on 25 Aug) from 0.54 a day ago. Foreign investors emerged as net buyers with RM59m shares after dumping RM1.65bn for the 14th consecutive session while both domestic institutions and local retailers registered net selling trades of RM33m and RM26m, respectively.

TECHNICAL OUTLOOK: KLCI

After sliding 117 pts in Sep, KLCI staged a 2nd straight day of rebound to end +11.7 pts to 1,409.4, underpinned by the Doji and Spinning top reversal patterns and bottoming up indicators. A strong reclaim above 1,400 and 1,413 (10D MA) 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 2nd day of relief rally from Dow and sliding 10Y MGS yield (-0.15% to 4.30%), KLCI is likely to retest our envisaged oversold rebound targets at 1,416-1,436-1,454 soon. However, further bounce may be capped 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) elevated inflation, (iv) heightened geopolitical tensions, (v) sliding RM vs USD (11.5% YTD to 4.64), (v) potential downgrades in Malaysian corporate earnings and GDP and (vi) resumption of foreign net selling (Oct: -RM54m, Sep:-RM1.63bn, Aug: +RM1.98bn).

Source: Hong Leong Investment Bank Research - 5 Oct 2022