Cautious mood prevails ahead of the Budget 2025 

Technical pick: CMSB

KLCI: 1632.63 (-9.3)
DOW: 43077.7 (337.3)
MSCI Asia: 189.93 (-1.9)
FCPO (RM): 4287 (-24)
BRENT (USD): 74.22 (-0.03)
USDMYR: 4.297 (-0.013)
SGDMYR: 3.2821 (-0.012)
EURMYR: 4.6814 (-0.022)
AUDMYR: 2.8738 (-0.019)
GBPMYR: 5.5932 (-0.045)
US: 10-yr yield (%) 4.0122 (-0.019)
BNM:10-yr yield (%) 3.765 (-0.019)

Asia/US. Tracking the profit taking pullback from Wall St, Asian markets ended mostly lower, battered by the rout in technology shares following a sluggish outlook from industry bellwether ASML. Sentiment was further dampened by waning optimism over Chinese stimulus measures as markets await another government briefing today. Dow rallied 338 pts to close at a fresh record high of 43,078, recouping from a previous day’s 325-pt rout, as sentiment was boosted by upbeat earnings from MS, USB, UAL and ABT, coupled with rotation out of mega caps to small-caps companies. Major economic data on tap for the rest of the week are retail sales, industrial production and building permits while key earnings reports expected are TSM, NFLX, TRV, AXP, and PG.       

Malaysia. Mirroring the fall in Wall St and regional markets, KLCI slid 9.3 pts to 1,632.6, led by selldown in CIMB, PMETAL, CDG, MAYBANK, IHH and KLK. Market breadth was negative for a 4th day at 0.49 vs 0.91 previously. Foreign institutions were major net buyers for a 2nd session (+RM37m, Oct: -RM983m, YTD: +RM2.57bn) alongside local retailers (+RM41m, Oct: +RM219m, YTD: -RM4.64bn) while local institutions (-RM78m, Oct: +RM764m, YTD: +RM2.07bn) 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 uncertainty surrounding China's stimulus and the roadmap to revive its economy. 

Technically, after the healthy pullback from 52W high at RM1.50 (July 16) to a low of RM1.13 (Aug 6), CMSB has been firming up to end at RM1.38. A successful breakout above the downtrend resistance near RM1.42 may boost upside potential towards RM1.50, RM1.59 (123.6% FR) and RM1.64 (138.2% FR) levels. Meanwhile, key supports are identified at RM1.30 (uptrend line) and RM1.27 (38.2% FR).   

Source: Hong Leong Investment Bank Research - 17 Oct 2024