Positive mood amid RM strength and China’s huge stimulus 

Technical pick: ENGTEX

KLCI: 1670.37 (5.1)
DOW: 42208.22 (83.6)
MSCI Asia: 189.64 (2.4)
FCPO (RM): 4043 (55)
BRENT (USD): 75.17 (1.27)
USDMYR: 4.1578 (-0.045)
SGDMYR: 3.2264 (-0.026)
EURMYR: 4.6299 (-0.038)
AUDMYR: 2.8458 (-0.02)
GBPMYR: 5.5616 (-0.023)
US: 10-yr yield (%) 3.728 (-0.021)
BNM:10-yr yield (%) 3.745 (0.015)

Asia/US. Mirroring a 4.15% rally on SHCOMP, Asian markets ended mostly higher after the PBOC unveiled several measures designed to stem the worsening economic outlook and market mood, including a 50-bps cut in the RRR, further reductions in the 7D repo rate, MTL and LPR facilities. Sentiment was also boosted by the BOJ’s Governor comment that the central bank still has time to assess market and economic developments before adjusting monetary policy. The Dow dipped as much as 68 pts following a sluggish Sep consumer confidence index (plunged to 3Y low at 98.7). However, the index rebounded to close +84 pts at a record high of 42,208, fuelled by increased bets on deeper rate cuts this year and China’s huge stimulus measures. Key economic readings this week will be on durable goods orders and Powell’s speech (Sep 26) coupled with personal spending, personal income, and PCE deflator (Sep 29).

Malaysia. Tracking higher Wall St and regional markets, KLCI gained 5.1 pts at 1,670.4, led by TENAGA, MRDIY, SUNWAY, YTLPOWR, MAYBANK and HLBANK. Market breadth rebounded to 1.02 vs 0.68 previously while daily volume rose 4.5% to 3.51bn shares valued at RM3.1bn. Foreign institutions emerged as major net sellers (-RM56m, Sep: +RM1.11bn, YTD: +RM4.16bn) while local retailers (+RM34m, Sep: -RM283m, YTD: -RM5.09bn) and local institutions (-RM22m, Sep: -RM833m, YTD: +RM936m) were notable net buyers.

Outlook In wake of the Fed’s pivot and the narrative of a US soft landing, China’s stimulus measures, alongside RM appreciation, domestic policy clarity and continuity, improved economic growth and earnings delivery, the KLCI is poised to sustain its uptrend towards short-term resistance levels at 1,684 to 1,700 (support: 1,638-1,647-1,660). However, further rally will depend on insights from the upcoming Budget 2025 (to be tabled on Oct 18), as well as additional details regarding the Johor-Singapore Special Economic Zone (JS-SEZ), expected to be finalized by the end of Nov. 

Technically, ENGTEX may grind higher following a strong close above multiple key MAs with bullish technical readings. A successful breakout above RM0.70 will lift the stock towards RM0.735 (76.4%FR and RM0.79 (52W high) ahead, while downside risks well-cushioned at RM0.62 (20D MA)-RM0.65 (50D MA) range. 

Source: Hong Leong Investment Bank Research - 25 Sept 2024