MARKET REVIEW

Asia/US. Asian markets ended higher for a 2nd day, taking cues from a strong lead on Wall Street as weak US economic data and Australia’s smaller-than-expected rate hike may help to keep the Fed from over tightening. Ahead of the key Sep nonfarm payrolls data, Dow pared losses to 42 pts at 30,273 (from as much as -430 pts) as concerns about aggressive Fed tightening remained following upbeat reports from the Sep ADP Employment Change and ISM services. Additionally, Fed President Mary Daly said the anticipation of cuts next year is misplaced and there is a high bar for slowing the 75 bps pace of hikes. Meanwhile, energy stocks extended their gains after the OPEC+ agreed to reduce output by 2m bpd to counter recent sharp correction in oil prices.

Malaysia. Tracking relief rallies from Wall St and regional markets, KLCI soared 11.2 pts to 1,420.6, recording its 3rd consecutive gain. Market breadth stayed positive at 1.23, albeit lower from 2.03 a day ago. Foreign investors resumed as major net sellers (-RM68m, Oct: - RM120m) together with local retailers (-RM33m, Oct: -RM49m) while domestic institutions registered net buying trades of RM101m (Oct: +RM169m).

TECHNICAL OUTLOOK: KLCI

After sliding 117 pts in Sep, KLCI staged a 3rd consecutive day of rebound to end +11.2 pts to 1,420.6, underpinned by the Spinning top reversal pattern (3 Oct) and a breakout above 10D MA near 1.411. The next stiff hurdles are pegged at 1,436-1,454 zones. Key supports remained at 1,363-1,380-1,400 zones.

MARKET OUTLOOK

Ahead of the tabling of Budget 2023 tomorrow and the US Sep jobs report, profit taking activities may cap further strong gains after rebounding from a low of 1,385 (3 Oct). Overall, wild swings may prevail in Oct (resistance: 1,436-1,454-1,468) 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) potential downgrades in Malaysian corporate earnings and GDP and (vi) resumption of foreign net selling (Oct: -RM68m, Sep:-RM1.63bn, Aug: +RM1.98bn).

Source: Hong Leong Investment Bank Research - 6 Oct 2022