MARKET REVIEW

Asia/US. Tracking the Dow’s slide fall last Friday, Asian markets fell in early trades after strong US Dec ADP data suggested that the Fed may keep raising interest rates. However, most markets recouped losses as investors welcomed China’s reopening will eventually reinvigorate China’s economic recovery despite a near term hiccup amid massive wave of infections. The Dow surged 701 pts to 33,631 (+483 pts WoW) and the US 10Y Treasury yield slipped 16 bps to 3.56% as a pair of poor economic reports from Dec’s job data and ISM services ease expectations of more aggressive monetary tightening by the Fed. Investors may also get another chance from the upcoming Powell’s speech (10 Jan) and US Dec CPI print (12 Jan) data for clues as to the Fed’s future course of action.

Malaysia. Ahead of the US Dec jobs print, KLCI ended flat (-0.4-pt, WoW: -14.9 pts) at 1,480.6 after declining as much as 6.5 pts to 1,474.5, in line with the overnight Dow’s slide. Market breadth (gainers/losers ratio) slipped to 0.85 from 1.15 a day ago, while trading value tumbled 18% to RM1.61bn. Foreign investors tuned net buyers for a second day (+RM40m, Jan: +RM73m) after net sellers sold RM368m from December 29 to January 4, followed by local retailers (+RM5m, Jan: +RM51m), while local institutions continued to sell equities for a third day (-RM45m, Jan: -RM124m).

TECHNICAL OUTLOOK: KLCI

With KLCI still holding up above the uptrend channel, we reaffirm our view that KLCI’s near term uptrend may continue, with major hurdles situated at 1,492 -1,512-1,528 levels. Only a decisive break below the support trend line near 1,470 would set off a selloff towards the 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, we remain hopeful that KLCI could chalk up a back-to-back gain in Jan (resistance: 1,493-1,512-1,528). Given the 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. Key events to watch out for in Jan include (1) the FOMC meetings (31 Jan-1 Feb) and BNM OPR decision (19 Jan) to assess the 2022 cumulative impact of 4.25% Fed rate and 1% OPR hikes, (2) the UMNO general assembly (11-14 Jan), (3) the start of the US 4Q22 results season (starting this Friday from US major banks), and (4) political turmoil in Sabah.

Source: Hong Leong Investment Bank Research - 9 Jan 2023