MARKET REVIEW Asia/US. Despite reports that China was considering easing its strict Covid -19 restrictions, most Asian markets fell after struggling for direction with technology-heavy bourses leading losses after US 10Y Treasury yield spiked to 14Y high. Sentiment was also dampened by fears of rapid economic slowdown in China over the delay of the release of key economic data. After rising as much as 398 pts in early trades, the Dow surrendered all its gains to end -90 pts at 30,333, taking cues from a batch of mixed results (Neflix, IBM, AT&T, Union Pacific, Whirlpool), hawkish Fed officials’ comments and surging US 10Y Treasury yield to a 14Y high (+10 bps to 4.23%). On the data front, sales of existing homes fell 1.5% in Sep for the eighth-straight monthly decline, marking its longest stretch of declines since 2007.

Malaysia. Following the Election Commission’s announcement of nomination (5 Nov) and polling (19 Nov) dates and persistent buying momentum from local funds, KLCI surged 22.6 pts (+64.4 pts in five days) to 1,437.7, underpinned by selected buying interests in plantation, banking and telco stocks. On funds flow, foreigners (-RM84m; Oct: -RM898m) and retailers (-RM37m; Oct: +RM15m) were the net sellers whilst local institutions emerged as the net buyers totalling RM121m (Oct: +RM883m).

TECHNICAL OUTLOOK: KLCI

On the back of bullish MACD/RSI readings and a bullish close above 10D/20D MAs, KLCI could stage further residual rebound towards formidable barriers near 1,454 -1,468 levels before profit taking activities resurface. Conversely, key supports are pegged at 1,373- 1,400- zones.

MARKET OUTLOOK

After rallying from 1,373 (2Y low), KLCI could still climb higher amid bullish MACD and RSI indicators. However, after surging 64 pts in five days and ahead of long weekend Deepavali holidays coupled with prevalent headwinds, profit taking may cap further gains (resistance: 1,454-1,468; support: 1,398-1,408-1,428)., reflected by a steeply overbought stochastic reading. Technically, DAYANG (HLIB-BUY-TP RM1.26) could witness further rebound (support: RM1.05-1.08; resistance: RM1.15-1.20-1.24) in anticipation of a rounding bottom formation, underpinned by expectations of (1) a positive upcoming 3Q22 results, (2) price hikes across the board for multiple value chains in the sector – i.e. i-HUC, MCM, OSVs, Drilling rigs etc and (3) strong outstanding orderbook of RM1.8bn.

Source: Hong Leong Investment Bank Research - 21 Oct 2022