MARKET REVIEW

Asia/US. Bucking the rallies in China and Hong Kong markets as China’s swift reopening sparked hopes of a faster economic recovery, most Asian markets ended mixed, taking cues from surging Covid cases in China and heightened fears of IMF’s stern warning of a global recession in 2023. Ahead of the key US jobs report this Friday, the Dow tumbled as much as 297 pts amid lingering worries of Fed’s aggressive stance to tame sticky inflation coupled with heightened recessionary warning by IMF fears and potential downward earnings revisions. Tesla plummeted 12.2% after the EV maker missed its 2022 delivery target, and Apple slid 3.7% after reports that it will cut production due to withering demand.

Malaysia. After rallying 32.9 pts in the last six consecutive sessions, KLCI surrendered back 21.5 pts on post window dressing blues coupled with the fear of Covid-19 resurgence in anticipation of China tourists’ influx as the nation reopens its borders on 8 Jan. Meanwhile, foreign investors extended their net outflows for a 3rd session (-RM32m, Dec: - RM1.36bn) whilst the local institutions (+RM19m, Dec: +RM1.49bn) and retailers (+RM13m, Dec: -RM134m) emerged as major net buyers in equities.

TECHNICAL OUTLOOK: KLCI

Despite yesterday’s rout, KLCI is still able to maintain its posture above the support trendline from 1,373. Barring any decisive breakdown below the support trend line, KLCI’s near term uptrend may continue with major hurdles situated at 1,493-1,512-1,528 levels. Conversely, a breakdown below the support trend line near 1,470 would trigger a selldown towards 1,436-1,454 zones.

MARKET OUTLOOK

Despite the post window dressing blues yesterday, we remain hopeful that KLCI would chalk up a positive month in Jan (resistance: 1,493-1,512-1,528) barring a decisive breakdown below the key 1,454-1,462 supports, underpinned by undemanding CY2023’s valuation (13x P/E vs 10Y mean 16.9x) and bottomed out foreign shareholding (Nov 2022: 20.7% vs all-time low 20.1% in Aug). Major events to watch out for in Jan: (1) FOMC (31 Jan-1 Feb) and BNM (19-20 Jan) meetings to assess the 2022 cumulative impact of 4.25% Fed rate and 1% OPR hikes to weaker macroeconomic and corporate data, (2) the UMNO general assembly on 13 Jan, (3) opportunities and risks for the global economy and markets following the China’s borders’ reopening on 8 Jan. Technically, YTLPOWR (HLIB BUY-TP RM1.04) should attract buyers on weakness near 200D MA support at RM0.705 for recovery upside towards the RM0.76-0.80-0.84 targets. Lower supports are pegged at RM0.68-0.69 levels.

Source: Hong Leong Investment Bank Research - 4 Jan 2023