MARKET REVIEW Asia/US. Asian markets ended lower after a strong US labour market data reinforced expectations for more aggressive interest rate hikes from the Fed. Also, the weak China’s Caixin Sep PMI services and heightened geopolitical tension in Ukraine following multiple explosions in Crimea bridge and Kyiv. Ahead of the US Sep CPI release (13 Oct) and the start of the earnings season this week, Dow ended lower for the 4th straight session (-93 pts to 29,203) as a perceived risk-off mood took hold with investors continued weighing the looming recession and hawkish remarks from Fed officials that high interest rates for an extended period of time is crucial to clamp down hot inflation. Key earnings this week include JP Morgan, Citigroup, Morgan Stanley, PepsiCo, TSMC, United Health etc.

Malaysia. In sync with overnight rout from Wall St and intensifying speculations that parliament will be dissolved soon after unveiling the Budget 2023, KLCI fell 14.4pts to 1,406 last Friday (WoW: +11.4 pts). Market breadth turned negative at 0.64 from 1.33 a day ago. WoW, foreign investors resumed as major net sellers (-RM335m, Oct: -RM335m, Sep:- RM1.63bn, Aug: +RM1.98bn) together with local retailers (-RM74m, Oct: -RM74m, Sep:+RM452m, Aug: +RM141m ) while domestic institutions registered net buying trades of RM409m (Oct: +RM409m, Sep:+RM1.17bn, Aug: -RM2.11bn).

TECHNICAL OUTLOOK: KLCI

After rebounding from a low of 1,385 (3 Oct) to intraday high of 1,428 (6 Oct), KLCI tumbled 14.4pts to 1,406 last Friday, ahead of the release of Budget 2023 and mounting speculation that Parliament will be dissolved soon to pave way for GE15. Following the announcement of dissolution of Parliament and extended Wall St rout, we think that more weakness may creep in soon. Key supports are pegged at 1,350-1,360-1,380 zones. Any residual strength in the current oversold rebound is likely to be capped nearby 1,428-1,436-1,454.

MARKET OUTLOOK

Tracking extended Wall St slump and higher perceived market risk premium for Malaysia following the dissolution of Parliament on 10 Oct, KLCI may resume its downward consolidation. Overall, wild swings will prevail in Oct (resistance: 1,428-1,436-1,454; supports: 1,348-1,363-1,384) in wake of jittery market backdrops, driven by (i) global recession fears, (ii) elevated inflation, (iii) heightened geopolitical tensions, (iv) potential downgrades in Malaysian corporate earnings and GDP, and (v) resumption of foreign net selling.

Source: Hong Leong Investment Bank Research - 11 Oct 2022