MARKET REVIEW

Asia/US. Ahead of the speech by Jerome Powell, Asian markets rose amid expectations of smaller Fed’s future rate hikes, signs that China may soon exit from COVID-zero restrictions following deteriorating Nov Chinese manufacturing and services activities coupled with widespread protests. Ahead of the key Nov jobs data on 2 Dec, the Dow rallied 737 pts to 34,589 while the US 10Y Treasury yield (-14bps to 3.61%) and dollar index (-0.78% to 106) slumped as Powell signalled a slowdown in the pace of tightening as early as December but indicate that the Fed may stay with restrictive policy for a long time before it ends its inflation fight.

Malaysia. After tumbling as much as 12.2 pts, KLCI staged a strong reversal to end +11.8 pts at 1,488.8, driven by optimism of the formation of new cabinet line-up soon as well as the sharp gains in Ringgit to 4M high at RM4.445/USD due to expectations of a downshift in Fed’s hawkish policy. Foreigners remained as the major net sellers (-RM75m; Nov:- RM283m) followed by retailers (-RM15m; Nov:+RM98m) whilst local institutions were the sole net buyers (+RM90m; Nov:+RM185m).

TECHNICAL OUTLOOK: KLCI

After rallying 58.4pts to a 3M high of 1,501.9 on 24 Nov, KLCI retraced to a low of 1,464 yesterday (within our envisaged 1,454-1,468 supports) before staging a technical rebound to end +11.8 pts at 1,488.8. The hammer-liked candlesticks on 29-30 Nov coupled with a close above 10D/20D MAs signalled the benchmark has more legs to go after a brief consolidation, targeting the key 200D MA barrier of 1,505 next before marching higher to re-challenge 1,528 (17 Aug high) and 1,553 (200W MA) zones. On the flip side, a decisive breakdown below 1,454-1,468 will dampen KLCI back to 1,420-1436 levels.

MARKET OUTLOOK

Pending the formation of a new cabinet line-up soon and Powell’s less hawkish remark coupled with a seasonally positive December outings (10Y/20Y: +2.6%/2.8%), KLCI may revisit the key 200D MA barrier or 1,505 next before marching higher towards 1,528 -1,553 zones. On the flip side, a decisive breakdown below 1,454-1,468 support will dampen KLCI back to 1,420-1436 levels. Technically speaking, SWIFT (RM0.465, consensus 7.6x P/E FY23E), a leader in the local haulage business with ~10% market share, should attract buyers with key supports at RM0.43-0.44. A convincing breakout above the 20D MA near RM0.48 should lift prices higher towards RM0.50-0.55 zones.

Source: Hong Leong Investment Bank Research - 1 Dec 2022