MARKET REVIEW

Asia/US. Most Asian markets ended mixed as investors weighed on China’s gradual zero COVID relaxation and the prospect of a higher for longer Fed’s rate regime following recent upside surprises in the US services and payroll data. The Dow plunged as much as 529 pts before paring the losses to 351 pts at 33,596 as investors fretted about the recessionary fears from aggressive central bank efforts to tame persistently high inflation, dashing hopes for an imminent Fed pivot while prompting bets on a higher terminal rate.

Malaysia. Tracking lower Asian markets, KLCI ended flat at 1,471.6 as investors await more policy leads from the new unity government. Market breadth (gainers/losers ratio) was positive for the 6th consecutive session at 1.05, supported by a 23% hike in trading value to RM2.55bn. Foreigners continued its net selling spree for the 12th sessions out of 14 (- RM90m; Dec: -RM503m) whilst local institutions (+RM76m; Dec: +RM599m) and retailers (+RM14m; Dec: -RM96m) were the major net buyers.

TECHNICAL OUTLOOK: KLCI

KLCI continued its consolidation mode as the index failed to surpass the critical 200D MA near 1,504 levels. As long as the index is able to close above the key support trend line (from 2Y low of 1,373) near 1,454, we remain optimistic that KLCI could resume its upward momentum after a brief consolidation. Key supports are pegged at 1,436-1,454 whilst resistances are situated at 1,504-1,528-1,555 zones.

MARKET OUTLOOK

Trading conditions may remain choppy in the near-term, as investors await more policy leads from the unity government, the upcoming 13-14 Dec FOMC meeting and a vote of confidence on PM (when Parliament convenes on 19 Dec). However, downside risk is limited (support: 1,436-1,454; resistance: 1,482-1,504) in anticipation of further economic reopening in China, Bursa’s depressed valuation (CY23 P/E 13x vs 10Y mean 16x) coupled with strengthening political stability as a coalition agreement involving all parties in the unity Government will be signed soon. SENFONG (a block rubber specialist for tyres over 40 years of track record, FY6/22 P/E:9x, DY: 6%) remains in base building mode near crucial support at RM0.63-0.65, with a downtrend resistance breakout confirmation near RM0.675 will spur greater upside towards RM0.71-0.76 zones.

Source: Hong Leong Investment Bank Research - 7 Dec 2022