MARKET REVIEW Asia/US. Most Asian markets ended higher whilst HSI and SHCOMP narrowed their losses as investors continued to recalibrate the positive US earnings reports and a bet on Fed pivot against the China’s policy and economic uncertainties after President Xi tightened his grip on the country’s decision-making bodies. The Dow continued its ascent (+337 pts to 31,876) for the 3rd straight session as investors cheered a slew of positive earnings results (eg GM, United Parcel, Microsoft) with falling 10Y US Treasury yield (-14 bps to 4.10%) amid expectations of the Fed may fine-tune their aggressive rate hikes in Dec, underpinned by the recent worsening economic indicators.

Malaysia. Tracking Wall St rally, KLCI jumped as much as 7.6 pts in early trade but surrendered the entire gains due to profit taking, ending -2 pts at 1,444.4 after surging 73 pts in the last six days. Market breadth fell to 0.94 after rising above 1 in the previous 4 sessions. On funds flow, foreigners were the only net buyers (+RM52m, Oct: -RM825m, Sep:-RM1.63bn) whilst local retail (-RM37m, Oct:-RM72m, Sep: +RM452m) and institution (-RM15m, Oct: +RM897m, Sep: +RM1.17bn) investors were the major net sellers.

TECHNICAL OUTLOOK: KLCI

Tracking bullish MACD and RSI indicators coupled with Wall St relief rally, KLCI advanced towards our envisaged 1,454-1,468 barriers before closing 2 pts lower at 1444 yesterday on profit taking after rallying from 2Y low at 1,373. Barring a successful breakout above these hurdles, KLCI is likely to consolidate its recent gains, with key supports pegged at 1,400-1,425 zones.

MARKET OUTLOOK

After last week’s rally, KLCI’s rebound still have legs amid bullish MACD and RSI indicators coupled with recent relief rally from Wall St. However, profit taking may cap gains near 1,454-1,468 hurdles (support: 1,400-1,427) after rallying 71 pts from 2Y low at 1,373, reflected by the steeply overbought stochastic reading coupled with prevalent headwinds including (i) global recession fears, (ii) elevated interest rates and inflation uncertainty, (iii) heightened US-China tensions after President Xi’s solidified control over the ruling party, (iv) potential lower guidance for Malaysia corporate earnings and GDP, and (v) GE15 fluidity. We feel this pattern of market volatility is unlikely to change in the near term and is not uncommon during periods of economic storms. With capital preservation as the key, we continue to advocate investors to seek refuge in banks, telcos, utilities, consumer, healthcare, and construction sectors, in anticipation that the new government post GE15 will continue to be highly supportive of domestic consumption.

Source: Hong Leong Investment Bank Research - 26 Oct 2022