MARKET REVIEW Asia/US. Most Asian markets ended mixed, led by selloff in SHCOMP (-1.2%) and HSI (- 2.4%) as markets fretted over a potential sharp economic slowdown in the world 2nd largest economy due to its zero-COVID policy and more U.S. curbs on trade. Moreover, the delay in the release of key economic data further dampened sentiment. After surging 888 pts in two days, the Dow slipped 100 pts as strong earnings results (P&G, United Airlines, Netflix, IBM etc) were not enough to offset hawkish Fed officials’ comments and soaring US 10Y Treasury yield to a 14Y high (+13 bps to 4.13%). On the data front, housing starts fell 8.1% in Sep amid soaring mortgage rates but building permits for future home construction unexpectedly climbed 1.4%, buoyed by an increase in multi-unit projects.

Malaysia. Tracking further rebounds in Wall St and UK markets from recent routs, KLCI record its 4th straight gain to end +14.7 pts at 1,415.1, underpinned by active buying interests in banking stocks as the sector is trading inexpensively amid recent price pullback, supported by a strong earnings CAGR of 10.4% for CY22-24. On funds flow, foreigners (- RM54m) and retailers (-RM6m) were the net sellers whilst local institutions emerged as the net buyers totalling RM60m.

TECHNICAL OUTLOOK: KLCI

After sliding 15.3% from YTD high of 1,620 to a low of 1,373, KLCI has staged a 4-day 41.7-pt technical rebound at 1,415.1 yesterday, taking cues from improving risk sentiment on strong recoveries in the US and UK markets. As technical indicators are on the mend and a close above 10D/20D MAs, KLCI could stage further residual rebound towards formidable barriers near 1,436-1,454 levels before profit taking activities resurface. Conversely, key supports are pegged at 1,363-1,373-1,400 zones.

MARKET OUTLOOK

Ahead of the Election Commission’s announcement today on the GE15 nominations and polling dates, KLCI may rise further amid improving risk sentiment and bullish technicals. However, lingering internal and external headwinds over the global economy, hawkish Fed, elevated inflation, geopolitics, potential earnings downgrade and GE15 fluidity should temper gains (support: 1,363-1,373-1,400; resistance: 1,425-1,436-1,454).

VIRTUAL PORTFOLIO (FIG1)

In the wake of the prevailing uncertainties, we had squared off our positions on GENM (4.3% loss) and BJFOOD (8.9% gain) yesterday.

Source: Hong Leong Investment Bank Research - 20 Oct 2022