Key Supports at 1,427-1,436 Zones to Prevent Further Slide Towards 1,400

KLCI:    1440.6 (-1.9)
DOW:    32784 (-252)
FCPO (RM):    3742 (-20)
BRENT (USD):    87.9 (-2.20)
USDMYR:    4.787 (0.0065)
SGDMYR:    3.491 (0.0025)
EURMYR:    5.049 (-0.004)
AUDMYR:    3.022 (-0.0051)
GBPMYR:    5.787 (-0.0058)
US: 10-yr yield (%)    4.84 (-0.11)
BNM:10-yr yield (%)    4.19 (0.04)

Asia/US*. MSCI All Countries Asia Pacific index slid 1.4% to 150.1, dented by surging bond yields and slumps in technology stocks amid mixed results and weak guidance from US tech giants. Sentiment was further rattled by uncertainty over Japanese monetary policy when BOJ meets on 31 Oct and lingering fears of debt crisis in the China’s property market despite recent news of government’s CNY1tn stimulus spending. Dow tumbled 0.8% to 32,784 (-8.1% from 52W high) while the Nasdaq slid 1.7% at 12,595 (-12.9% from 52W high) as the upbeat advanced 3Q GDP growth of 4.9% and falling US10Y yield (-11 bps to 4.84%) failed to arrest the rout triggered by META and ALPHABET due to disappointing outlook guidance. After hours, AMZN price rallied 4.6% on strong results and positive guidance. 

Malaysia. In line with the cautious regional markets, KLCI lost 1.9 pts at 1,440.6. Market breadth was positive for a 3rd session at 1.08 vs 1.25 a day ago, on a 14% jump in turnover of 3.23bn shares worth RM2bn. Local institutions (+RM103m, Oct: +RM2.2bn, YTD: +RM4.8bn) emerged as the major net buyers for a 10th consecutive session while foreign institutions (-RM100m, Oct: -RM2.07bn, YTD: -RM4.05bn) and local retailers (-RM3m, Oct: -RM143m, YTD: -RM770m) were the biggest net sellers. 

Outlook Ahead of the Nov results season, KLCI is envisaged to consolidate further, spooked by current unfriendly macro backdrops, i.e. the Middle East turmoil, China’s uneven economic outlook, sliding RM (vs USD), a resumption of foreign selling in Oct totaling RM2.08bn (exceeded 3Q23 net inflow of 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 - 27 Oct 2023