• If foreign inflows continue, total accumulated foreign net buy could reach RM8bn in 2024, if not more

• Foreign investors ramped up buying momentum in Bursa Malaysia post US’s FOMC policy decision

• Though sentiment is expected to remain intact but economic announcement from China this week could bite

FBMKLCI remained on the rise thanks to the feel-good-factor especially with political premium we are enjoying. Foreign investors buying momentum remained unimpeded though turned a bit wobbly prior to US’s 1st policy decision where foreigners sold over RM100mn (Monday and Tuesday) of Malaysians shares only to rebound strongly post US policy decision where their net buy exceeded RM250mn (Wednesday and Friday), pushing YTD tally to RM763.8mn. Taking 2024 average trading days (note: 249 days) and total accumulated foreign holdings in Bursa Malaysia YTD of RM763.8mn (not taking into account intermittent selling pressure), foreign investors net buy could touch RM8bn, if not more especially in 2H where we expect the market to be ‘hot and sizzling’. This is not surprising amid Bursa Malaysia that recorded one of its best months in March 2022 where foreign net buy surged to a multi year high of RM3.2bn following RM2.8bn it made in February. All in, February and March 2022 foreign net buy touched a cool RM6bn in 2 months and hence, our bullish stance on the market this year. Malaysia enviable growth prospects, political tranquility (Unity Government control 2/3 of Dewan Rakyat), resilient oil price and undervalued Ringgit will become the much anticipated catalyst, long overdue especially when selling pressure over the local bourse accelerated in 2018 (political crisis) though it started much earlier (note: since 2014/15).

Though prospects are good for Bursa Malaysia but we remain wary of negative development from China. For the record, China will be announcing its January 2024 Caixin PMI Services on the 5th of February and January CPI on the 8th. On that score, Malaysia has borne the brunt of China’s economic predicament no thanks to our economic and trade coupling, hence, investors risk premium over FBMKLCI. Those concerns are ‘valid’ especially when China is our largest trade partner (i.e., @ circa 20%) while demand for our goods also depend on the country especially CPO, rubber and semi finished goods (i.e., E&E). As the saying goes, when China sneezes, Malaysia will catch a cold. We remember vividly when FBMKLCI was under selling pressure in October and November (2023) when China released a less-than-inspiring PMI Services numbers when it dropped close to neutral level. Thankfully, consensus is projecting a rebound in China’s PMI Services for January (note: 53.0; December 2023: 52.9). China will also be announcing its January 2024 CPI numbers where street estimates expect another deflationary month for the country. CPI for January is expected to come in at -0.5% YoY against December of -0.3%. Base effect disadvantage could be at play given a year ago CPI that touched 2.1%. In any case, we find China deflation narrative is brilliant as it will become its weapon and arsenal ahead of 2nd China-US Trade war. All in, we expect another good week for FBMKLCI barring negative development from China. 

On the daily chart, TESLA INC (TSLA.US) has falling below the Moving Averages (MA), signaling a bearish trend and indicating a downward trajectory. Despite this, the Relative Strength Index (RSI) suggests an oversold condition, while the negative Moving Average Convergence Divergence (MACD) aligns with the overall bearish sentiment. The occurrence of a gap down implies a sudden shift in market sentiment, with the closing price significantly lower than the previous day's close, potentially amplifying the bearish outlook. If the current trend persists, the nearest support is expected at 150.57. However, in the case of a reversal, it could potentially rebound to a range spanning from 187.91 to 295.26.

Source: BIMB Securities Research - 5 Feb 2024