Extended consolidation as investors weigh a mixed Budget 2025 and external woes 

Technical pick: NATGATE

KLCI: 1645.68 (-0.3)
DOW: 42931.6 (-344.3)
MSCI Asia: 191.39 (2.3)
FCPO (RM): 4302 (3)
BRENT (USD): 74.09 (1.03)
USDMYR: 4.3073 (0.001)
SGDMYR: 3.2799 (-0.001)
EURMYR: 4.6719 (0.003)
AUDMYR: 2.8783 (-0.012)
GBPMYR: 5.6078 (-0.005)
US: 10-yr yield (%) 4.1916 (0.109)
BNM:10-yr yield (%) 3.782 (0.002)

Asia/US. Asian markets ended mixed as investors weighed the reductions in China’s 1Y/5Y LPRs by 0.25% to 3.1% and 3.6%, respectively, coupled with Japan’s general election on Oct 27. Meanwhile, gold prices hit a record high, fuelled by rising tensions in the Middle East and investor positioning ahead of the US presidential election. The Dow plunged 345 pts to 42,931 from record closing yesterday, as investors geared up for braced for major earnings reports from TSLA, UPS, BA, KO, 3M, GM and VZ. Sentiment was also dampened by spiking US 10Y bond yield (+11 bps to 4.2%) as hopes for a swift Fed rate cuts fell amid recent strong US economic indicators and growing possibility of a Trump Presidential victory and his proposed tariffs and tax policies. 

Malaysia. KLCI ended 0.3-pt lower in a tight range bound mode as investors assessed the Budget 2025 details and external woes. Market breadth turned negative at 0.61 vs 1.51 last Friday. Foreign institutions were major net buyers for a 5th consecutive day (+RM39m, Oct: -RM500m, YTD: +RM2.95bn), while local institutions (-RM14m, Oct: +RM498m) alongside local retailers (-RM25m, Oct: +RM102m, YTD: -RM4.76bn) emerged as major net sellers.

Outlook As investors continue to recalibrate the overall Budget 2025 details and brace for the upcoming US results season, KLCI is likely to trend sideways (support: 1,625-1,630; resistance: 1,666-1,672-1,684). Moreover, the outlook may be tempered by external risks, including the potential for a wider Middle East conflict, a contentious US election, and uncertainties surrounding China's stimulus measures and its economic recovery plans.

Technically, NATGATE is poised for a bullish rounding pattern after the healthy pullback from all-time high at RM2.52 (July 16) to a low of RM1.65 (Sep 9), before firming up to close at RM1.92 yesterday. A successful breakout above the neckline resistance near RM1.96 may boost upside potential towards RM2.09 (50% FR), RM2.19 (61.8% FR) and RM2.32 (76.4% FR) levels. On the flipside, failure to defend RM1.80 (50D MA) and RM1.86 (76.4% FR) supports may drag the stock lower towards RM1.72 (200D MA) and RM1.76 (30D MA).

Source: Hong Leong Investment Bank Research - 22 Oct 2024