Hovering Near 200D MA Support at 1,436 Zones

KLCI:    1435.7 (-2.5)
DOW:    33141 (    205)
FCPO (RM):    3684 (17)
BRENT (USD):    88.1 (-1.76)
USDMYR:    4.785 (-0.0092)
SGDMYR:    3.502 (0.0112)
EURMYR:    5.089 (0.0108)
AUDMYR:    3.045 (0.028)
GBPMYR:    5.858 (0.0334)
US: 10-yr yield (%)    4.82 (-0.03)
BNM:10-yr yield (%)    4.16 (-0.03)

Asia/US. After tumbling 3.2% in the last four consecutive session, the MSCI All Countries Asia Pacific index rebounded 0.2% at 152, boosted by a retreat in UST10Y yield from 16Y highs, as well as pledges by President Xi to steps up economic supports for the lacklustre China economy. After plunging 1,061 pts in four consecutive sessions, Dow rebounded 205 pts to 33,141 while the US10Y yield fell 3 bps at 4.82, taking cues from easing Israel-Hamas conflict (as Israel rethinks ground invasion), strong US Composite PMI data and 3Q23 earnings optimism (77% of those S&P 500 companies that had posted results topped estimates). Earnings wise, KO, GE, GM, Spotify, Microsoft, Alphabet and 3M reported earnings that beat Wall St estimates.

Malaysia. Bucking the technical rebound in regional markets, KLCI drifted 2.5 pts lower at 1,435.7 after falling as much as 8 pts amid lingering concerns of sliding RM vs USD (the 2nd worst performer in Asia after Yen). Despite the headline decline, market breadth was positive at 1.47, halting the 5-day negative losses. Local institutions (+RM68m, Oct: +RM1.94bn, YTD: +RM4.53bn) emerged as the major net buyers for a 8th consecutive days while local retailers (-RM52m, Oct: -RM112m, YTD: -RM0.74bn) topped foreign institutions (-RM16m, Oct: -RM1.82bn, YTD: -RM3.8bn) as the biggest net sellers. 

Outlook. Ahead of the Nov results season, KLCI is envisaged to consolidate further amid current unfriendly macro backdrops i.e. the Middle East turmoil, China’s stalling economy, 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 13x 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).

Source: Hong Leong Investment Bank Research - 25 Oct 2023