MARKET REVIEW

Asia/US. Asian markets slid, taking cues from technology-led rout on Wall Street amid disappointing quarterly results and news that the US and allies could impose export limits on China soon. Sentiment was also dampened by widening Covid restrictions in China cities as cases soared. The Dow rallied 828 pts to 32,862 (higher for the 6th consecutive session and +5.7% WoW), boosted by upbeat results from Apple and O&G sectors. Also buoying sentiment was bets on the Fed about a possible downshift in jumbo rate hike post the Nov FOMC meeting, supported by a slew of recent mixed economic data and last Friday’s Sep core PCE Deflator (Fed’s preferred proxy for inflation) jumped 5.1% yoy, below expectations of 5.2%. Major economic events this week: FOMC meeting (2 Nov), Oct jobs data (4 Nov) and Oct ISM manufacturing (1 Nov) and services (3 Nov) sectors reports.

Malaysia. In sync with sluggish Asian markets, KLCI fell 6.8 pts at 1,447.3 (+0.9-pt WoW), led by profit taking pullback in selected banking and plantation heavyweights. Market breadth was negative as the (G/L) ratio weakened to 0.87 from 1.55 a day ago. Local institution logged in a 4th straight net selling session (-RM62m, Oct: +RM714m, Sep: +RM1.17bn) whilst local retail (+RM28m, Oct:-RM129m, Sep: +RM452m) and foreigners (+RM34m, Oct:-RM585m, Sep: -RM1.63bn) were the net buyers.

TECHNICAL OUTLOOK: KLCI

We expect KLCI to trade in a range bound mode in the short term. The index may encounter some resistance near 1,468 (downtrend line) following recent relief rally from 1,373 (2Y low). Only a successful breakout could spur the benchmark higher to revisit formidable barriers at 1,482-1,500-1,514 territory. On the contrary, any healthy pullback is likely to be well-supported near 1,400-1,424-1,436 levels.

MARKET OUTLOOK

We expect KLCI to extend its range bound consolidation ahead of the FOMC and BNM (3 Nov) meetings coupled with the GE15 nominations (5 Nov) prior to the polling date on 19 Nov. After recent relief rebound from 1,373 (2Y low), profit taking may cap gains near 1,468 and 1,480 levels whilst 1,500-1,518 will act as more formidable hurdles (support: 1,400- 1,424-1,436). With capital preservation as the key amid lingering headwinds, 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 - 31 Oct 2022