MARKET REVIEW

Asia/US. Ahead of the key US PPI release, most Asian markets rebounded last Friday from recent pullbacks as investors cheered China’s further relaxation of strict anti COVID-19 measures, outweighing concerns of a potential US hard landing amid fresh recessionary fears. Ahead of the Nov CPI print (13 Dec) and FOMC decision (14 Dec), the Dow slid 305 pts to 33,476 (-954 pts WoW) following a hotter-than-expected Nov PPI data and a rebound in consumer confidence as 1Y inflation expectations slipped to a 52w low, stoking jitters about a prolonged hawkish Fed and an impending US recession.

Malaysia. In line with higher regional markets and expectations of the traditional Dec’s window dressing, KLCI staged a long-awaited 11.3-pt rebound to 1,477.2 (-4.6 pts WoW) after suffering a 5-day losing streak. WoW, foreign investors logged net outflows of RM732m (vs -RM344m previously), which were absorbed by the local institutions (+RM680m, vs +RM496m previously) and retailers (+RM52m, vs -RM152m previously).

TECHNICAL OUTLOOK: KLCI

KLCI’s near term consolidation will persist as investors weigh on China’s relaxation on its strict anti-COVID measures, inflation and interest rate jitters ahead of the 13-14 FOMC meeting. As long as the index is able to maintain a posture above 1,454 (support trend line from 2Y low of 1,373), 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 near 1,482-1,502-1,528 zones.

Daily KLCI: Uptrend is still intact barring a breakdown below support trendline

MARKET OUTLOOK

As investors await more domestic reform policies from the unity government, KLCI may consolidate ahead of the 13-14 Dec FOMC meeting and a vote of confidence on the PM when Parliament convenes on 19 Dec. However, downside risk (support: 1,436-1,454; resistance: 1,482-1,502) may be cushioned by expectations of further economic reopening in China, Bursa’s depressed valuation (13x CY23 P/E against 10Y mean 16x), strengthening political stability as a coalition agreement involving all parties in the unity Government will be signed soon, coupled with the expectations of year-end window dressing in Dec (10Y/20Y: +2.6%/2.8%). Technically, after rallying 51% from a low of RM0.205 (30 Sep) to a high of RM0.31 (5 Dec), profit-taking dips on HIAPTEK (HLIB-BUY TP RM0.33) in anticipation of a weaker 1QFY7/23 results (due out on 15 Dec) and toppish indicators could attract buyers with downside risks cushioned at RM0.25-0.27 amid undemanding valuations at 0.4x P/B and 6x FY24E P/E. Upside targets are situated at RM0.31-0.34 levels.

Source: Hong Leong Investment Bank Research - 12 Dec 2022