MARKET REVIEW

Asia/US. In the wake of a pullback from Wall St overnight before Powell’s speech and US key CPI print (12 Jan), Asian markets ended mixed as investors weighed Fed’s future interest rate hike path following hawkish remarks by two Fed officials (Raphael Bostic and Mary Daly) that interest rate should remain above 5%. Despite recent hawkish remarks by Fed officials and Powell’s speech that unpopular decisions may be needed to bring inflation down (US 10Y bond yield: +9 bps to 3.62%), the Dow gained 186 pts to 33,704 amid hopes that the Dec CPI print will show further moderation, paving a way for the central bank to slow its pace of rate hikes to assess the full impact of 2022’s hikes of 425 bps.

Malaysia. Tracking sluggish regional markets, KLCI fell 8.3 pts to 1,485.1, led by persistent selldown in heavyweights such as MISC, AXIATA, INARI, IHH, Inari, DIGI and NESTLE. Market breadth (gainers/losers ratio) turned negative to 0.77 from 1.56 previously, while trading value remained flattish at RM1.91bn. Local institutions turned net buyers for a 2nd

day (RM44m, Jan: -RM30m) whilst local retailers (-RM32m, Jan: -RM27m) and foreign investors (-RM12m, Jan: +RM57m) emerged as net sellers on equities.

TECHNICAL OUTLOOK: KLCI

With KLCI still holding up above the uptrend channel, we reaffirm our view that the index’s near-term uptrend may continue. A successful close above 1,492 (or the 200D MA) will lift the index higher towards 1,512–1,528 levels. Conversely, a decisive break below the support trend line near 1,470 now would set off a fall towards the 1,436–1,454 zones.

MARKET OUTLOOK

Barring a decisive break below the support trendline from the 2Y low of 1,373, we remain optimistic that the KLCI will post back-to-back gains in January (resistance: 1,512-1,528), supported by the benchmark's undemanding CY2023 valuation (12.4x P/E vs 10Y mean 17x), low foreign shareholding (Dec 2022: 20.6% vs all-time low of 20.1% in Aug), and more investors returning from year-end holidays. Given China’s border reopening on 8 Jan, we remain positive on tourism-related beneficiaries such as AIRPORT, CAPITALA, GENM, IOIPG, SUNWAY, IGBREIT, CARLBRG, HEIM, IHH, KPJ, BJFOOD, BONIA and FOCUSP. Key events to watch in Jan: (1) FOMC meetings (31 Jan-1 Feb); (2) BNM OPR decision (19 Jan); (3) UMNO general assembly (11-14 Jan); and (4) the US 4Q22 results season (starting this Friday from US major banks).

Source: Hong Leong Investment Bank Research - 11 Jan 2023