Entering Oversold Territory With Key Support at 1,400 Levels

KLCI:    1415.6 (-0.2)
DOW:    33119 (-10)
FCPO (RM):    3600 (-7)
BRENT (USD):    84.1 (-1.74)
USDMYR:    4.728 (-0.0025)
SGDMYR:    3.446 (-0.0016)
EURMYR:    4.968 (0.0017)
AUDMYR:    2.995 (0.0035)
GBPMYR:    5.732 (-0.0051)
US: 10-yr yield (%)    4.72 (-0.01)
BNM:10-yr yield (%)    4.13 (0.05)

Asia/US. In line with a rebound from Wall St overnight, most Asian bourses ended higher following the slide in the US10Y bond yield and crude oil prices coupled with the release of much weaker-than-expected private jobs data. Sentiment was also strengthened in anticipation of the improving Sep economic data in China and an upsurge in travel during the Golden Week holiday are fuelling hopes that economic recovery could gain traction. Dow lost 10 pts to 33,119 in a volatile trade, taking cues from extended correction in oil prices and a tight labour market with weekly unemployment claims holding near 7M low. Overall, investors remained on edge and are looking towards the Sep’s nonfarm payrolls data for more clarity on the strength of the labour market, as well as charting Fed’s policy path ahead. 

Malaysia. KLCI eased 0.2-pt at 1,415.8 after hovering between 1,412.2-1,420.6 as investors braced for the crucial US jobs data tonight. Market breadth rebounded to 1.28 vs 0.35 previously after slipping into negative territory for the 7th consecutive day. Foreign institutions’ net selling trades intensified for a 2nd straight day (-RM411m, Oct: -RM828m, YTD: -RM2.8bn) followed by local retailers (-RM22m, Oct: +RM82m, YTD: -RM0.54bn) whilst local institutions (+RM433m, Oct: +RM746m, YTD: +RM3.34bn) emerged as the major net buyers.

Outlook Following a decisive breakdown below 200D MA (near 1,438), we expect KLCI to extend its rangebound consolidation (resistance: 1,438-1,448-1,465; support: 1,400-1,411) as investors weigh the direction of Fed policy, China’s recovery pace, depreciating RM (vs USD) and fears of potential new taxes and tightening purses in the Budget 2024 speech (13 Oct). Nevertheless, we reiterate buy on dips to ride on a better 4Q23 (YE target: 1,530), underpinned by: (i) improved risk appetite post-election and clearer political runway allowing the Unity Government to roll out its strategic plans and reforms; (ii) undemanding KLCI at 12.8x CY2024 P/E (vs 10Y average 16.2x), (iii) the traditional year-end window dressing effect (92% positive hit rate in Dec since the GFC).

Source: Hong Leong Investment Bank Research - 6 Oct 2023