Stay cautious amid bumpy ride ahead 

Technical pick: FOCUSP

KLCI: 1639.31 (-17.1)
DOW: 42196.52 (39.5)
MSCI Asia: 195.81 (0)
FCPO (RM): 4148 (-48)
BRENT (USD): 73.9 (0.34)
USDMYR: 4.176 (0.019)
SGDMYR: 3.2406 (0.01)
EURMYR: 4.6233 (0.011)
AUDMYR: 2.8794 (0.007)
GBPMYR: 5.5507 (0.011)
US: 10-yr yield (%) 3.7809 (0.049)
BNM:10-yr yield (%) 3.731 (0.003)

Asia/US. HSI rallied 6.2% to 22,443 amid further optimism on Beijing’s latest stimulus policies, while the rest of the Asian markets ended mostly lower as heightened tensions in the Middle East dampened risk appetite. Ahead of the major nonfarm payrolls data on Oct 4, Dow tumbled as much as 184 pts but ending +39 pts at 42,196 as investors weighed conflicts in the Middle East and upbeat private employment data. Meanwhile, US10Y bond yield fell 5 bps to 3.78% after stronger-than-expected jobs numbers and Powell’s earlier remarks indicated more but smaller rate cuts and caveat that the Fed is ‘not on any pre-set course’.

Malaysia. KLCI slid 17.1 pts to 1,639.3, tracking the negative regional markets amid escalating tensions at the Middle East and persistent profit-taking by foreigners for the 8th straight session. Market breadth plunged to 0.31 vs 1.77 previously while daily volume recorded 3.86bn shares (+20% vs avg 3.2bn in Sep), valued at RM2.72bn (-18% vs avg RM3.32bn in Sep). Foreign institutions continued their net selling (-RM163m, Oct: -RM224m, YTD: +RM3.33bn) while local institutions (+RM120m, Oct: +RM213m, YTD: +RM1.52bn) alongside local retailers (+RM43m, Oct: +RM11m, YTD: -RM4.85bn) emerged as the major net buyers.

Outlook In wake of the Fed’s pivot and the narrative of a US soft landing, China’s comprehensive stimulus measures, RM appreciation, political stability and progressive domestic reform initiatives, coupled with improved economic growth and earnings delivery, KLCI is poised to revisit major resistance levels at 1,684-1,700 levels after a healthy consolidation. Nevertheless, investors should prepare for a bumpy road in a historically challenging month of Oct, navigating continued profit-taking by foreigners (to make room for China in their portfolios following China’s massive stimulus), insights from the upcoming Budget 2025, rising geopolitical tensions in the Middle East, and the political dynamics leading up to the US elections (Nov 5).

Technically, FOCUSP is poised for a bullish triangle breakout after successfully building a strong base above RM0.70-0.75 levels. A decisive breakout above RM0.82 (downtrend line) may spur greater upside towards RM0.85 (upper BB) and RM0.93 (23.6% FR) range. 

Source: Hong Leong Investment Bank Research - 3 Oct 2024