MARKET REVIEW

Asia/US. Asian market ended mixed, with China and Hong Kong extended their winning streak, driven by the euphoria from China’s border reopening. Meanwhile, other Asian markets were rather tepid due to the Fed hawkish stance in the Dec FOMC minutes coupled with the sluggish China services and composite PMIs remained in contractionary for the 4th straight month in December due to Covid-related disruptions. Ahead of the key US Dec jobs report tonight, the Dow resumed its selling spree (-340 pts to 32,930) following hotter-than-expected labour markets data from weekly jobless claims and Dec ADP Employment Change reports, backing the hawkish rhetoric unveiled in the Dec FOMC minutes.

Malaysia. After losing 26 pts in two days, KLCI closed 11.38 pts higher at 1,480.9, led by heavyweights such as CIMB, MAYBANK, SIMEPLT, PETGAS, TENAGA and PPB. Market breadth (gainers/losers ratio) turned positive to 1.14 from 0.93 a day ago while trading value jumped 18% to RM1.96bn. Foreign investors tuned net buyers after net selling RM368m in the last 4 days (+RM86m, Jan: +RM32m) followed by the local retailers (+RM6m, Jan: +RM47m) whilst local institutions emerged as the major net sellers (- RM92m, Jan: -RM79m) in equities.

TECHNICAL OUTLOOK: KLCI

With KLCI holding up firmly above the uptrend channel, we reaffirm our view that KLCI’s near-term uptrend may continue with major hurdles situated at 1,493-1,512-1,528 levels. Only a decisive breakdown below the support trend line near 1,469 would trigger a selldown towards 1,436-1,454 zones.

MARKET OUTLOOK

In view of the undemanding CY2023 valuation (12.4x P/E vs 10Y mean 16.7x), low foreign shareholding (Nov 2022: 20.7% vs all-time low 20.1% in Aug), and more investors returning from the year-end holidays to cushion downside, we remain hopeful that KLCI could chalk up a back-to-back gain in Jan (resistance: 1,493-1,512-1,528). Meanwhile, with the clock counting down to China’s border reopening on 8 Jan, we remain positive on tourism-related beneficiaries such as AIRPORT, CAPITALA, GENM, SUNWAY, IGBREIT, CARLBRG, HEIM, IHH, KPJ, BJFOOD and FOCUSP. Other major events to watch out for in Jan include (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 11-14 Jan and (3) the start of US 4Q22 results season next week.

Source: Hong Leong Investment Bank Research - 6 Jan 2023