Potential technical rebound with stiff resistance near 1,638-1,657 zones 

Technical pick: GOHUB

KLCI: 1634.91 (-0.7)
DOW: 42512 (431.6)
MSCI Asia: 191.11 (-0.9)
FCPO (RM): 4230 (-22)
BRENT (USD): 76.58 (-0.6)
USDMYR: 4.2815 (-0.006)
SGDMYR: 3.2835 (-0.006)
EURMYR: 4.6953 (-0.015)
AUDMYR: 2.8847 (0.001)
GBPMYR: 5.6034 (-0.011)
US: 10-yr yield (%) 4.0726 (0.061)
BNM:10-yr yield (%) 3.757 (-0.009)

Asia/US. Regional markets soared in line with overnight gains from Wall St, led by a rally in technology stocks. However, SHCOMP (-6.6%) and HSI (-1.4%) lost steam after the NDRC’s briefing provided few details on further stimulus. Ahead of the upcoming inflation data and the start of 3Q24 earnings season this week, the Dow ended at record high (+432 pts to 42,512) whilst US10Y bond yield rose 6 bps to 4.06%, spurred by bargain hunting on mega tech stocks as investors weighed the Sep FOMC minutes and easing Middle East tensions oo news of a possible ceasefire between Hezbollah and Israel. The Fed’s minutes revealed a "substantial majority" of officials supported a jumbo 50 bps cut but emphasised that future cuts will be dependent on inflation and the labour market data. Currently, the odds for Fed rates to remain unchanged (4.75%-5.00%) in Nov meeting stood at 29% vs 0% a week ago. 

Malaysia. In line with the slide in China and HK markets, KLCI eased 0.7-pt to 1,634.9 after rising as much as 6.7 pts. Market breadth weakened to 0.97 vs 1.17 previously while daily volume was flat at 3.22bn shares valued at RM2.47bn. Foreign institutions emerged as net buyers for a 2nd session after net selling for the 11 days (+RM70m, Oct: -RM881m, YTD: +RM2.67bn) alongside local retailers (+RM12m, Oct: +RM33m, YTD: -RM4.82bn) while local institutions (-RM82m, Oct: +RM848m, YTD: +RM2.15bn) emerged as major net sellers.

Outlook KLCI is expected to remain choppy in short term in run-up to the tabling of Budget 2025 on Oct 18 (support: 1,606-1,625; resistance: 1,638-1,657-1,684), as investors recalibrate (i) continued net outflows by foreigners amid portfolio rebalancing and rotation of funds (-RM1.66bn over the past 13 days); (ii) lingering geopolitical tensions in the Middle East; (iii) upcoming US 3Q24 results season; (iv) the effectiveness of China’s massive stimulus; and (v) political dynamics during the US elections countdown (Nov 5).
Technically, following the bullish triangle breakout, GOHUB (FIG#3) may revisit RM1.20-1.27-1.30 zones, underpinned by improving technical readings. Key supports are now pegged at RM1.07-1.10 levels.

Source: Hong Leong Investment Bank Research - 10 Oct 2024