MARKET REVIEW

Asia/US. Tracking overnight slump on Wall St, Asian markets ended mostly in the red, weighed down by a hotly contested US midterm elections and a crypto slump following Binance’s retraction of the FTX deal pressured risk assets. Sentiment was cautious as investors also braced for US inflation data and fresh Covid outbreaks in China, quashing hopes of any plans to loosen its strict zero-COVID policies. Overnight, Dow rocketed 1,201 pts or 3.7% to 33,715 (its biggest daily gain since 2000) while the US 10Y Treasury yield dived 0.28% to 3.81% (its biggest daily decline since 2009) following a cooler-thanexpected Oct headline CPI (7.7%, forecast 8%), lifting hopes that the Fed could slow the pace of rate hikes in the upcoming meetings.

Malaysia. Bucking the mixed regional markets, KLCI rose 3.5 pts to 1,449.7, boosted by recent RM (vs USD) strength to RM4.69 (off recent peak RM4.76) and a resumption of foreign net inflow for a 5th consecutive session. Despite the headline gain, market breadth (G/L ratio) weakened to 0.74 from 1.05 a day ago. Foreign institutions were the major buyers (+RM96m, Nov: +RM50m) while local institution (-RM78m, Nov: -RM51m) and retailers (-RM18m, Nov: +RM1m) recorded net outflows for a 5 th straight day.

TECHNICAL OUTLOOK: KLCI

Taking cue from an overnight 3.5% relief rally from Dow overnight, the odds would favour the bulls for KLCI to stage a long-awaited downtrend line breakout (near 1,454) today, underpinned by the 20D/30D MA golden cross and rising RSI. A successful breakout above the said resistance will spur the index to retest 1,468-1,482-1,500 levels next. Conversely, any pullback is likely to find good supports at 1,408-1,421-1,436 zones.

MARKET OUTLOOK

The robust 3.5% rally from Dow’s overnight on prospect of Fed pivot following softening Oct CPI print could spillover to local bourse today, which bodes well for KLCI to overcome the downtrend resistance (near 1,454) from YTD high of 1,620. A successful downtrend line breakout may spur the index to retest 1,468-1,482-1,500 barriers next (supports are pegged at 1,408-1,421-1,436), with a more formidable hurdle near 1,509 (200D MA) as investors recalibrate the US mid-term election outcome, uncertainty over the future path of China’s zero-COVID policy amid rising Covid cases, GE15 fluidity and ongoing Nov results season.

Technically, SCGBHD’s (RM0.30-Not rated) share price may advance in the near term after secured a RM83.2m contract from Sarawak Energy, its largest contract from state power provider to supply and deliver power cables and conductors for 18 months from Nov 2022 (current orderbook stood at RM752.9m to last until 2024). A successful refill of the RM0.305-0.32 gap (26 Oct) could witness share price moving higher to RM0.35-0.36-0.38 zones. Alternatively, SCGBHD-WA (RM0.085, listed on 4 Nov and expiring in Oct 2027) may also offer a good proxy for trading opportunity considering its decent premium at 18% and gearing ratio of 3.5x.

Source: Hong Leong Investment Bank Research - 11 Nov 2022