MARKET REVIEW

Asia/US. Asian markets ended mostly lower from recent rallies as investors fretted about potential rising geopolitical tensions in Europe amid unconfirmed news that Russian rockets had crossed into NATO-member Poland. Sentiment was also dented by resurgent Covid outbreaks in major cities in China that threatened further economic damages. Dow eased 39 pts as investors weighed upbeat Oct retail sales and mixed earnings from retail giants such as Target (below forecast) and Lowe’s (above forecast) coupled with soaring recessionary fears after the US 10Y -2Y yield curve inversion tumbled to -0.57, the lowest since Feb 1982. In bond markets, the US 10Y yield slipped 8 bps to 3.69% whilst the policy-sensitive 2Y yield ended flat at 4.36% as most Fed officials signalled the central bank could soon ease the tightening rate, saying that policymakers had already done a significant job in taming inflation. Meanwhile, fears of war spillover across the border ease after NATO-Poland leaders said missile on Poland was probably a Ukrainian stray.

Malaysia. After rallying from 2Y low at 1,373 (13 Oct) to a high of 1,469 (14 Nov), KLCI extended its consolidation for a 3rd day (-2.1 pts to 1,448.4), ahead of the long weekend holidays (Public holidays: 18-19 Nov) and GE15 polling (19 Nov), underpinned by a 17% decline in daily volume to 2.32bn shares valued at RM1.71bn. On funds flow, foreign investors were the major sellers (-RM80m, Nov: -RM52m) for a 2nd session after recorded a 7th straight session of net buying of RM545m (4-14 Nov) while local institution (+RM39m, Nov: +RM112m) and retailers (+RM41m, Nov: -RM60m) were the major net buyers.

TECHNICAL OUTLOOK: KLCI

After surging 96 pts from 2Y low of 1,373 to a high of 1,469, KLCI closed lower for a 3rd day to 1,448. We expect KLCI to continue its consolidation ahead of the crucial GE15 (19 Nov). The recent fall below the downtrend line (near 1,454) could act as a magnet for the index to retest lower supports at 1,408-1.428-1,436 levels. Conversely, a strong reclaim above 1,454-1,469 hurdles may spur greater upside towards 1,482-1,507 zones.

MARKET OUTLOOK

Despite signs of easing US-China tensions following the Biden-Xi meeting in Bali, reduced property and Covid curbs in China coupled with fanned expectations of the Fed to slow its tempo of hikes, KLCI is likely to extend its consolidation (resistances: 1,469-1,482-1,500; supports: 1,408-1.424-1.436) amid uncertainties ahead of the GE15. Technically, the bullish downtrend resistance breakout (from YTD high) and positive indicators may see HIAPTEK’s (HLIB-BUY-TP RM0.33) share price to rise further. However, it will need breakout confirmation above RM0.285 to fuel upside momentum towards formidable barrier at RM0.30, while RM0.225-0.245 supports should cushions downside risks.

Source: Hong Leong Investment Bank Research - 17 Nov 2022