MARKET REVIEW

Asia/US. Asian markets ended mostly higher, after unconfirmed reports circulated about a committee being formed in China for reopening discussions and gradually exit strict Covid zero policy. After climbing 242 pts in early trades following better-than-expected ISM PMI manufacturing and JOLTs Job Openings figures. However, Dow surrendered the entire gains to end -80 pts at 32,653 amid pressure from tech after upbeat economic reports could weigh on hopes for a less hawkish Fed in the future rate hikes as investors await the Fed rate decision (expected to deliver its 4th jumbo hike of 75 bps).

Malaysia. Bucking the rally in regional markets, KLCI slipped 14.9 pts on profit taking as investors await the key FOMC (2 Nov) and BNM (3 Nov) decisions coupled with GE15 nominations (5 Nov). Market breadth turned negative as the (G/L) ratio weakened to 0.80 from 1.23 a day ago. Local institution returned as net buyers (+RM78m, Oct: +RM804m, Sep: +RM1.17bn) whilst local retail (-RM10m, Oct:-RM142m, Sep: +RM452m) and foreigners (-RM68m, Oct:-RM662m, Sep: -RM1.63bn) continued their net selling trades.

TECHNICAL OUTLOOK: KLCI

After rallying 95 pts from 2Y low to our envisaged downtrend resistance near 1,468 yesterday, KLCI ended -14.5 pts to 1,445.9 on profit taking. We reiterate that only a successful breakout above the said hurdle will signal a trend reversal and potentially spur KLCI to revisit formidable barriers of 1,482-1,500-1,513 territory. Conversely, failure to break above the resistance will signal a pullback to 1,400-1,420-1,436 support levels.

MARKET OUTLOOK

With key events such as the FOMC and BNM (3 Nov) meetings, GE15 nominations (5 Nov) and polling date (19 Nov) around the corner, we expect KLCI to extend its range-bound consolidation as investors continue to be at risk-off mode. We reiterate that the recent relief rally from 1,373 (2Y low) would face stiff hurdles near 1,468-1,480-1,500 zones whilst supports are pegged at 1,400-1,420-1,436 levels. Technically, TAKAFUL is poised for a downtrend resistance breakout near RM3.36 soon, and move higher towards RM3.42-3.50- 3.58 next (supports: 3.15-3.24). We reckon most short-term negatives surrounding the stock would have been priced in, seeing it is trading close to -1.5SD P/B. Accumulate TAKAFUL on weakness, especially for those who want a longer-term play into the bright takaful space as the group is one of the leaders in the Islamic insurance industry, and the only pure listed takaful operator on Bursa Malaysia.

Source: Hong Leong Investment Bank Research - 2 Nov 2022