MARKET REVIEW

Asia/US. Asian markets ended lower after Powell said in his post-meeting press conference that the talk of a pause in rate hikes is "premature" and the terminal interest rate will most likely be higher than previously forecasted to squash stubborn inflation. Sentiment was also dampened by China’s weak Oct service sector and the latest lockdown around Foxconn Technology's main plant in Zhengzhou. Overnight, Dow plunged as much as 420 pts before narrowing the losses to 146 pts at 32,001, as investors weighed on the 2Y low Oct ISM services index (54.4, forecast: 55.5) and a hawkish speech by Powell as he reaffirmed the Fed’s commitment to continue hiking rates until they see clear evidence of cooling inflation.

Malaysia. In line with Wall St and regional markets rout amid Powell’s hawkish rhetoric and another 25 bps OPR hike by BNM (4th hikes YTD), KLCI slid 31.2-pts to end at 1,420.4, with 29 out of 30 KLCI heavyweights were in a sea of red. Market breadth (G/L ratio) slumped to 0.36 from 1.43 a day ago, led by intensifying net selling from foreign institutions (-RM265m, Nov:-RM332m, Oct: -RM594m) whilst local institution (+RM204m, Nov: +RM255m, Oct: +RM726m) and retailers (+RM61m, Nov: +RM77m, Oct: -RM132m) returned as net buyers.

TECHNICAL OUTLOOK: KLCI

Following the bearish Marubozu pattern and deteriorating technical oscillators after a 31.2- pt slide yesterday, KLCI near term outlook has turned decisively negative and is firmly trapped in a downtrend channel. Major supports are situated at 1,373-1,400 territory whilst resistances are pegged at 1,436-1,454-1,468 levels.

MARKET OUTLOOK

Following Wall St rout and a bearish KLCI closing yesterday, the local bourse may witness further downward consolidation in the short term, taking cues from the hawkish Fed, GE15 fluidity (polling: 19 Nov) and ongoing Nov results season, compounded by a resumption of foreign investors’ net outflow for a 3rd straight month. Short term supports are pegged at 1,373-1,400 whilst resistances are situated near 1,454-1,468-1,480 zones.

Technically, DUFU’s share prices may continue to fall further, underpinned by poor 3Q22 results and gloomy HDD guidance (despite non-HDD revenue segment remains resilient) for 4Q22 and 1Q23. Knee-jerk selling could drag share prices lower towards 1.50-1.60 supports before staging an oversold rebound, with key hurdles near RM1.90-2.00-2.15 capping upside potential.

Source: Hong Leong Investment Bank Research - 4 Nov 2022