MARKET REVIEW

Asia/US. Asian markets ended mostly higher, cheered by the long-awaited Biden-Xi meeting to kickstart a “bridge-building effort” after relations plunged to “foothills of a Cold War” over contentious issues including trade, technology, Taiwan and human rights. Sentiment was also boosted by recent policy shifts involving China’s property sector and Covid strategy, outweighing disappointing China’s Oct industrial production and retail sales data. Overnight, the Dow surged as much as 450 pts following upbeat earnings from Walmart and Home Depot coupled with another lighter-than-expected US Oct PPI print. However, the gains were pared down to +56 pts at 33,593 amid hawkish Fed officials’ remarks from Raphael Bostic, contrasting sharply to Lael Brainard and Patrick Harker that hinted at a less aggressive tightening, as well as rising geopolitical tension in Europe after unconfirmed news that Russian rockets had crossed into NATO-member Poland.

Malaysia. Bucking higher regional markets, KLCI tumbled 13.5 pts to 1,450.5 with 27 out of 30 KLCI components ended in red, dampened by the GE15’s elevated outcome unpredictability, Despite the sluggish closing, market breadth (gainers/losers ratio) rebounded to 1.44 from 0.97 a day ago. On funds flow, foreign investors were the major sellers (-RM185m, Nov: +RM28m) after recorded a 7th straight session of net buying of RM545m while local institution (+RM150m, Nov: +RM73m) and retailers (+RM35m, Nov: - RM101m) were the major net buyers.

TECHNICAL OUTLOOK: KLCI

After surging 96 pts from 2Y low of 1,373 (13 Oct) to a high of 1,469 (14 Nov), KLCI closed lower for a 2nd day to 1,450 yesterday, ahead of the crucial GE15 on 19 Nov. The fall below the downtrend line could act as a magnet for the index to retest lower supports at 1,408- 1.428-1,436. Conversely, stiff hurdles are situated at 1,469-1,482-1,500 zones.

MARKET OUTLOOK

Ahead of the long weekend holidays (Public holidays: 18-19 Nov) and GE15 polling, KLCI is expected to stay choppy (resistances: 1,469-1,482-1,500; supports: 1,408-1.424-1.436) as market participants adopt a cautious “wait-and-see” attitude, given GE15’s elevated outcome unpredictability exacerbated by fragmented alliances that led to multi-cornered fights, coupled with +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). We like CTOS (HLIB-BUY-RM1.70 TP) for its leadership position, strong economic moat, and highly scalable business model. Meanwhile, the pick-up in economic activities is good for CTOS given stronger volume of credit and trade transactions. Technically, the stock should attract buyers on further weakness, with a decisive climb above the RM1.44 (200D MA) to aim for the RM1.50 (38.2% FR) and RM1.62 (61.8% FR) ahead, while downside is cushioned by RM1.32 (lower BB) and RM1.27 (30 Sep low).

Source: Hong Leong Investment Bank Research - 16 Nov 2022