MARKET REVIEW

Asia/US. Asian markets ended mixed lower on profit taking after a massive rally last week as investors recalibrated on the China’s sweeping directives to boost its property sector and fine-tuned its strict Covid policies, against Fed Governor Waller’s warning against getting too optimistic over Oct inflation report and reiterated that the Fed “still got a ways to go” before pausing rate hikes. After surging 1,345 pts WoW, the Dow tumbled 211 pts to 33,536 overnight as investors awaited a slew of retail giants’ results this week (i.e. Walmart, Home Depot, Target, Lowe’s, Macy’s and Kohl’s) and reassessed the future course of rate hikes following rising US consumer inflation expectations, hawkish comments from the Fed Governor Christopher Waller and a less hawkish tone by Fed Vice Chair it would be appropriate “soon” for the central bank to slow its pace of interest-rate hikes.

Malaysia. In line with cautious regional markets and ahead of the GE15, KLCI eased 4.2 pts after rallying 30 pts WoW, supported by a 12% decline in daily value at RM1.56bn vs average daily value RM1.77bn last week. On funds flow, foreign investors were the major buyers (+RM55m, Nov: +RM212m) for the 7th straight session while local institution (- RM34m, Nov: -RM76m) and retailers (-RM21m, Nov: -RM136m) recorded net outflows.

TECHNICAL OUTLOOK: KLCI

Ahead of the crucial GE15 on 19 Nov, we reiterate that KLCI is likely to consolidate its recent gains after rallying from 1,373 (2Y low). Stiff hurdles are situated at 1,482-1,500- 1,508. A decisive breakdown below the downtrend resistance line near 1,454 may push the index lower towards 1,424-1,436 zones.

MARKET OUTLOOK

After surging 91 pts from 1,373 (2Y low), KLCI could encounter stiff resistances near 1,482- 1,500-1,508 zones (key supports: 1,424-1,436) as market participants adopt a cautious “wait-and-see” attitude ahead of the GE15 given GE15’s elevated outcome unpredictability exacerbated by fragmented alliances on both sides led to multi-cornered fights, coupled with over 40% jump in registered voters since GE14 to >21m, stemming from Undi18’s lowering of the voting age to 18 from 21 and automatic voter registration (AVR). 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.

VIRTUAL PORTFOLIO (FIG1)

In anticipation of a volatile and holiday-shortened week (18 & 19 Nov were declared public holidays by PM yesterday) ahead of the GE15, we had squared off our positions on KGB (6.2% return), CARLSBG (6.2% return), UMC (6.7% return), CORAZA (4.8% return) and UEMS (12.5% return).

Source: Hong Leong Investment Bank Research - 15 Nov 2022