Navigating the seasonally choppy month in Oct 

Technical pick: SMRT

KLCI: 1648.91 (-11.2)
DOW: 42330.15 (17.2)
MSCI Asia: 195.04 (-2.3)
FCPO (RM): 4012 (17)
BRENT (USD): 71.77 (-0.21)
USDMYR: 4.1235 (-0.002)
SGDMYR: 3.2196 (0.003)
EURMYR: 4.614 (0.01)
AUDMYR: 2.8545 (0.013)
GBPMYR: 5.5233 (0.002)
US: 10-yr yield (%) 3.7809 (0.03)
BNM:10-yr yield (%) 3.735 (0.004)

Asia/US. Asian markets ended lower on profit taking, driven by a 4.8% rout on Nikkei 225 amid the risk of higher interest rates under new PM Ishiba, a known critic of the BOJ's ultra-easy policies. In contrast, SHCOMP rallied 8% ahead of the China National Holidays (1-7 Oct) as Beijing’s comprehensive stimulus packages lured foreign, institutional and retail investors amid fears of missing out. The Dow plunged as much as 384 pts before ending +17 pts at 42,330 after Powell indicated more rate cuts ahead but cautioned that the central bank did not have a preset path. This week, key events to focus are JOLTS data, ISM manufacturing (Oct 1), ISM services (Oct 3) and nonfarm payrolls (Oct 4), which will influence the Fed's policy direction. 

Malaysia. In wake of the continued liquidation by foreign institutions (to lock in handsome currency and capital gains), KLCI tumbled 11.2 pts to 1,648.9. Market breadth was negative at 0.75 vs 0.7 previously while daily volume surged 34.4% to 4.06bn shares valued at RM3.22bn (20.1% DoD). Foreign institutions continued their net selling (-RM251m, Sep: +RM510m, YTD: +RM3.55bn) for the 6th straight day while local retailers (+RM33m, Sep: -RM50m, YTD: +RM4.86bn) and local institutions (+RM218m, Sep: -RM460m, YTD: +RM1.31bn) emerged as the major net buyers.

Outlook In light 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 sustain its uptrend towards major resistance levels at 1,684 to 1,700 after a brief healthy consolidation. Nevertheless, investors should prepare for bumpy road in a historically choppy month of Oct, navigating continued profit-taking by foreigners, 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, SMRT is poised for a short-term consolidation after closing below multiple key MA supports. Major supports are identified at RM0.97-1.00. A successful breakout above immediate resistance of RM1.15 (50% FR) may kickstart the next uptrend towards stock towards RM1.21 (61.8% FR) and RM1.28 (76.4% FR) next. 

Source: Hong Leong Investment Bank Research - 1 Oct 2024