Anticipate a Mild Rebound Amid Overnight Wall St Rally With Resistance at 1,450-1,455 Zones

KLCI:    1439.2 (-2.7)
DOW:    32929 (    511)
FCPO (RM):    3694 (-43)
BRENT (USD):    87.5 (-3.03)
USDMYR:    4.762 (-0.0153)
SGDMYR:    3.487 (-0.0021)
EURMYR:    5.039 (-0.0078)
AUDMYR:    3.034 (-0.0029)
GBPMYR:    5.777 (-0.0221)
US: 10-yr yield (%)    4.89 (0.06)
BNM:10-yr yield (%)    4.10 (-0.01 )

Asia/US*. Asian markets ended mixed as investors braced for a busy week of central bank meetings (BOJ: 31 Oct; FOMC: 1 Nov and BOE: 2 Nov), key economic data from the US and China. Meanwhile, all eyes are on the US 3Q23 results season with AAPL, MCD, AMD, CAT and QCOM among the many reporting this week.  After plunging 710 pts WoW and 3,262 pts from 52W high, the Dow staged a 512-pt relief rally to end at 32,929, as investors awaited a crucial week filled with a FOMC decision, jobs report and a slew of US major corporate giants’ earnings. Meanwhile, Brent oil slid 3.3% to USD87.5 as traders mull the economic and monetary policy outlook coupled with the lingering Israel-Gaza conflict persists.

Malaysia. Tracking the mixed regional markets, KLCI slipped 2.7 pts to 1,439.2. Market breadth deteriorated to 0.38 vs 0.99 last Friday, accompanied by a 10% decline in trading value to RM1.52bn. Local institutions (+RM56m, Oct: +RM2.35bn, YTD: +RM4.95bn) and local retailers (+RM23m, Oct: -RM109m, YTD: -RM0.73bn) emerged as the major net buyers while foreign institutions (-RM79m, Oct: -RM2.24bn, YTD: -RM4.21bn) continued their selling spree for the 12th consecutive day. 

Outlook. We expect any potential rebound in the wake of an overnight rally from Wall St is likely to be brief, ahead of the FOMC (1 Nov) and MPC (2 Nov) meetings, as well as the upcoming Nov results season. Also, sentiment could stay cautious due to 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 totalling RM2.2bn (exceeded 3Q23 net inflow of RM1.9bn) coupled with soaring 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 - 31 Oct 2023