Fragile 200D MA Support Near 1,436 Amid External Headwinds

Asia/US. In line with an extended rout from Wall St, Asian markets slid amid concerns of surging US10Y bond yields (briefly crossed above 16Y high at 5%) and deepened Israel-Hamas conflict, as investors geared up for a slew of major US technology companies’ report cards this week, together with the US 3Q23 GDP and inflation readings. The Dow fell 191 pts to 32,936 after swinging between gains (+108 pts) and losses (-235 pts) while the US10Y bond yield fell 7 bps after topping 5.02% amid lingering headwinds from the conflict unfolding in Israel and Gaza, Fed’s “higher for longer rates” narrative, and the threat of a US government shutdown next month, overshadowing a raft of current 3Q23 earnings optimism. This week, attention will be focused on advanced 3Q23 GDP growth, the PCE Price index, S&P Global PMI and housing market health reports. Meantime, earnings reports set to pick up with key focus on Alphabet, Microsoft, Meta, Amazon, 3M, Coca-Cola, GM etc.

Malaysia. Mirroring the sluggish regional markets coupled with sliding RM to 25Y low (vs USD) at RM4.78, KLCI eased 2.9 pts at 1,438.1 (its 3rd straight losses), while market breadth slumped further to 0.26 vs 0.56 previously. Foreign institutions extended their selling spree for a 7th consecutive session (-RM41m, Oct: -RM1.8bn, YTD: -RM3.78bn) followed by local retailers (+RM15m, Oct: -RM60m, YTD: -RM0.66bn) whilst the local institutions (+RM66m, Oct: +RM1.9bn, YTD: +RM4.4bn) emerged as major net buyers. 

Outlook We expect KLCI to consolidate further amid current unfriendly macro backdrops i.e. the Middle East turmoil, sliding RM (vs USD), a resumption of foreign selling in Oct (MTD: -RM1.8bn; 3Q23: +RM1.9bn) coupled with surging bond yields. Nevertheless, we reiterate our buy on dips stance to ride on a better 4Q23 (YE target: 1,530), underpinned by: (i) improved risk appetite post state polls and clearer political runway allowing the Unity Government to roll out its strategic plans and reforms; (ii) undemanding KLCI at 13.1x CY2024 P/E (vs 10Y average 16.6x); (iii) potential tail-end of Fed’s tightening; and (iv) the traditional year-end window dressing effect (92% positive hit rate in Dec since the GFC).

VIRTUAL PORTFOLIO We had closed our position on MSTGOLF (6.5% loss) yesterday amid weakening technical.

Source: Hong Leong Investment Bank Research - 24 Oct 2023