MARKET REVIEW

Asia/US. Ahead of the key Nov jobs data release and uncertainty over the path of US inflation, MSCI All Countries Asia Pacific Index lost 0.87% on profit taking to 157.9 (WoW: +2.42%), outweighing reports that China plans to further scale back its strict anti-COVID measures amid mounting protests. The Dow plunged as much as 356 pts following the stronger-than-expected jobs data but all losses were erased to end +35 pts at 34,429 (+83 pts WoW) as investors took a respite from Powell's remarks that confirmed rate hikes would slow starting as early as the 13-14 Dec FOMC meeting. Meanwhile, Brent oil prices slid 1.5% to USD85.6 ahead of the OPEC+ meeting on 4 Dec Group (agreed to keep oil production unchanged and started a 2m bpd reduction) as the alliance weighed the impact of a pending ban (at USD60) on Russia’s crude exports by the G7/EU/Australia this week, weakening crude demand in China and mounting fears of a global recession.

Malaysia. Tracking lower regional markets and ahead of the cabinet announcement on Friday’s evening, KLCI slid 9.7 pts to 1,481.8 (-4.7 pts WoW). Despite the headline loss, market breadth (G/L ratio) remained positive at 1.33 vs 2.07 a day ago. WoW, foreigners expanded its net selling at RM302m (vs -RM82m previously) followed by retailers -RM130 (vs +RM86m previously) whilst the local institutions were the major net buyers RM496m (vs -RM4m previously).

TECHNICAL OUTLOOK: KLCI

Ahead of the cabinet formation last Friday, KLCI fluctuated within a smaller range of 33 pts (i.e. 1,464-1,497) against 78 pts in the preceding week (i.e. 1,427-1,505) before ending at 1,482. Following the cabinet announcement last Friday, we expect KLCI to remain choppy with key supports at 1,454-1,468, as investors may continue to weigh on the new cabinet line-up. After a brief consolidation, we are optimistic that KLCI would break the key 200D MA barrier at 1,505, followed by 1,528 (17 Aug high) and 1,555 (200W MA) zones.

MARKET OUTLOOK

In the wake of a pragmatic cabinet line-up, encouraging 3Q22 results season, Powell’s less hawkish remark and China’s gradual economic reopening, KLCI may revisit the immediate hurdles at 1,500-1,505 before marching higher towards 1,528-1,553 zones next, supported by a seasonally strong December showing (10Y/20Y: average +2.6%/2.8% growth). On the flip side, a decisive breakdown below 1,454-1,468 support will drag KLCI lower to 1,420- 1436 levels. However, there could be near-term volatility in the KLCI due to the 13-14 Dec FOMC meeting, a vote of confidence when Parliament convenes on 19 Dec coupled with the UMNO General Assembly from 21-24 Dec.

Source: Hong Leong Investment Bank Research - 5 Dec 2022