MARKET REVIEW

Global. Tracking overnight bullish Wall St performance, the MSCI Asia Ex-Japan index inched up 3.8pts to 632.9, boosted by expectations of more stimulus measures from China to support the flagging economy and a more optimistic view that Omicron will not impede the global economic recovery. Ahead of the key US CPI data tonight, Wall St (Dow: +35 pts at 35754; S&P500: +14 pts at 4701; Nasdaq 100: +68 pts at 16394) ended moderately higher, encouraged by more positive news highlighting the efficiency of vaccines in protecting against the Omicron variant. Meanwhile, the US 10Y Treasury yield rose for a 3rd consecutive day (+0.05% to 1.52%) in anticipation of Fed hawkish expectations when it meets on 13-14 Dec.

Malaysia. Bucking higher US and regional markets, KLCI lost 3.9 pts to 1494, led by declines in Axiata, Harta, Topglove, Nestle and PPB as investors weighed on the relentless foreign institutions’ liquidation (-RM927m in the last 10 straight sessions). Despite the headlines loss, the sentiment was positive for a 2nd day as 485 gainers edged 385 losers, while turnover lowered to 3.74bn shares valued at RM2.05bn.

TECHNICAL OUTLOOK: KLCI

Despite its steeply oversold position after sliding 119 pts from recent high of 1613 on 6 Dec, the bears are likely to stay for a while unless the index can swiftly reclaim above immediate overhead resistances at 1500-1513 zones. A successful breakout will drive the benchmark higher to refill the 1545-1560 gap (1 Nov), in anticipation of a seasonally stronger Dec window-dressing month. On the flip side, a decisive breakdown below 13M low at 1483 (6 Dec) may see the index drifting lower towards 1452 (a 2-year low).

MARKET OUTLOOK

On the back of subsiding fears that the contagious Omicron variant will not derail the global recovery (although more time is needed to understand more details such as the effectiveness of vaccines and severity of disease), we remain optimistic that KLCI may build a base at 1452-1483 levels prior to an oversold rebound as the market anchors recovery in anticipation of a possible Dec window-dressing activities. However, any rebound may be capped near 1540-1560 barriers given the resumption in foreign institutions’ liquidations, Fed’s hawkish tilt as well as the “market unfriendly” measures in Budget 2022 – Prosperity Tax and stamp duty hike.

Source: Hong Leong Investment Bank Research - 9 Dec 2021