MARKET REVIEW

Asia/US. Asian markets ended lower ahead of the key US CPI data and global central banks’ meetings this week. Sentiment was also dampened by surging Covid cases in China which might disrupt economic activities as the nation continues to scale back Covid restrictions. After sliding 954 pts WoW, the Dow rebounded 529 pts to 34,005 as sentiment was lifted by the New York Fed report for November showing that respondents see 1Y inflation running at a 5.2% pace (forecast: 5.8%), the lowest since Aug 2021 ahead of the key Nov CPI print (13 Dec) and FOMC decision (14 Dec).

Malaysia. In line with cautious regional markets and relentless foreign net outflows, KLCI fell 2.8 pts to 1,474.4. Foreigners continued its selling spree for the 10th sessions out of 11 albeit on a declining scale (-RM52m; Dec: -RM1bn) whilst local institutions (+RM37m; Dec: +RM1.07bn) and retailers (+RM15m; Dec: -RM70m) were the major net buyers.

TECHNICAL OUTLOOK: KLCI

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.

MARKET OUTLOOK

As investors await more domestic reform policies from the unity government, KLCI may consolidate ahead of the FOMC (14 Dec) and ECB (15 Dec) decisions coupled with 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 i) further relaxations of China’s zero Covid policies, ii) expectations of slower rate hike, iii) Bursa’s undemanding valuation (13x CY23 P/E against 10Y mean 16x), iv) strengthening political stability as a coalition agreement involving all parties in the unity Government will be signed soon, and v) expectations of year-end window dressing in Dec (10Y/20Y: +2.6%/2.8%). Technically, after rallying 10.8% from a low of RM4.16 (13 Oct) to a high of RM4.61 (25 Nov), profit taking activities saw the share price of PBBANK (HLIB-HOLD-TP RM4.80) ended lower at RM4.40 yesterday. In the near term, the stock is likely to engage in range bound consolidation within the RM4.55 (upper BB) and RM4.26 (lower BB) range.

Source: Hong Leong Investment Bank Research - 13 Dec 2022