Drifting Sideways Amid a Lack of Catalysts 

Technical Pick: SAMAIDEN

KLCI: 1642.5 (-3.2)
DOW: 42945 (14)
FCPO (RM): 4387 (86)
BRENT (USD): 76.04 (1.75)
USDMYR: 4.328 (0.02)
SGDMYR: 3.289 (0.01)
EURMYR: 4.681 (0.01)
GBPMYR: 5.614 (0.01)
US: 10-yr yield (%) 4.21 (0.01)
BNM:10-yr yield (%) 3.84 (0.05)

Asia/US. Tracking the Dow’s retreat from its all-time high, Asian markets ended mostly lower as investors navigated Beijing’s stimulus efforts to reinvigorate its ailing economy and Japan’s general election on Oct 27. Sentiment was also cautious amid bonds selloff on cooling expectations of Fed rate cuts, arising from concerns over better US economic data and the growing bets of Trump’s presidential victory that will stoke higher inflation given his campaign pledges. 

The Dow fell as much as 213 pts before ending +14 pts at 42,945, as investors wrestled with the Fed's rate-cutting pace against a resilient economy coupled with a slew of mixed earnings results from GM (+9.8%, above), VZ (-5%, below), TXN (+3.5% after hours, above) and MCD (-5.9% after hours, below). The benchmark is expected to remain volatile this week with major results from TSLA, HON, UPS, BA, KO, and 3M, alongside key economic indicators like S&P Global’s PMI, new and existing home sales, and the Fed’s Beige Book.

Malaysia. KLCI ended -3.2 pts at 1,642.5 as investors continued to assess 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 6th consecutive day (+RM107m, Oct: -RM493m, YTD: +RM3.06bn), while local institutions (-RM85m, Oct: +RM413m, YTD: +RM1.72bn) alongside local retailers (-RM22m, Oct: +RM80m, YTD: -RM4.78bn) retained as major net sellers.

Outlook In wake of a lack of meaningful rerating catalysts from the Budget 2025 and the downgrade of IMF’s global 2025 growth by 0.1% to 3.2%, KLCI is likely to waver (support: 1,625-1,630; resistance: 1,666-1,672-1,684) in the short term. Moreover, the outlook may be tempered by external risks, including the potential for a wider Middle East turmoil, a contentious US election given the sharply divergent trade priorities between Harris and Trump, and uncertainties surrounding China's stimulus measures and its economic recovery plans.
Technically, SAMAIDEN is still trapped in a downtrend channel. However, the stock is grossly oversold after correcting 28% from all-time high of RM1.42 (May 24) to RM1.02, with downside risk capped at RM1.00 and RM0.98 (76.4% FR) zones. A successful breakout above downtrend resistance near RM1.06 (61.8% FR) may boost upside potential towards RM1.10 (50D MA), RM1.13 (50% FR) and RM1.20 (38.2% FR) zones.

VIRTUAL PORTFOLIO On Oct 22, we had closed our positions on SCGBHD (1.2% return), AEON (7.6% return) and PBBANK (5.1% gain).

Source: Hong Leong Investment Bank Research - 23 Oct 2024