Sideways consolidation ahead of the Budget 2025 and external volatilities 

Technical pick: RHBBANK

KLCI: 1641.97 (5.4)
DOW: 42740.42 (-324.8)
MSCI Asia: 191.79 (-0.5)
FCPO (RM): 4283 (11)
BRENT (USD): 74.25 (-3.21)
USDMYR: 4.31 (0.013)
SGDMYR: 3.2944 (0.006)
EURMYR: 4.7033 (0.007)
AUDMYR: 2.8931 (0.004)
GBPMYR: 5.6382 (0.029)
US: 10-yr yield (%) 4.0317 (-0.069)
BNM:10-yr yield (%) 3.784 (0.015)

Asia/US. Bucking record highs from Wall St, Asian markets ended mixed as investors weighed sharp losses on SHCOMP (-2.53%) and HSI (-3.67%) amid fears of the sustainability of stimulus-driven rally, together with the lack of clarity over the size of planned fiscal boost announced on Oct 12. After hitting a new record high of 43.278 in early trade, the Dow ended -325 pts to 42,740 on strong profit taking as investors assessed a rout on mega tech stocks i.e. ASML (-16% on weak 2025 guidance) and NVDA (-4.5% on possible US AI chips export cap), as well as sifted through the latest batch of earnings reports. On earnings front, UNH slid 8.1% on sluggish outlook whilst GS (-0.1%) and BAC (+0.5%) ended flat after beating estimates. 

Malaysia. In line with record gains from Wall St, KLCI ended firmer for a 2nd session ahead of the Budget 2025 announcement this Friday, led by PBBANK, MAYBANK, HLBANK, SDG, NESTLE and MAXIS. However, market breadth remained negative for a 3rd straight day at 0.91 vs 0.52 previously. Foreign institutions were major net buyers (+RM88m, Oct: -RM1.02bn, YTD: +RM2.53bn) after a two-day selloff, alongside local retailers (+RM20m, Oct: +RM178m, YTD: -RM4.68bn) while local institutions (-RM108m, Oct: +RM842m, YTD: +RM2.15bn) emerged as major net sellers.

Outlook As investors await the Budget 2025 details on Oct 18, KLCI is likely to trend sideways (support: 1,606-1,625; resistance: 1,652-1,663-1,684). Sentiment will remain cautious as investors navigate the ongoing US 3Q24 earnings results, the risk of long-feared regional war in the Middle East, and the effectiveness of China’s outsized stimulus measures to address its economic malaise. 

Technically, RHBBANK is poised for a bullish ascending triangle breakout after firmly closing above multiple key MAs and support trendline. A successful cross above RM6.35 (52W high) may spur the stock to retest RM6.45 (123.6% FR) and RM6.63 150% FR) targets. 

Source: Hong Leong Investment Bank Research - 16 Oct 2024