MARKET REVIEW

Asia/US. Tracking higher Wall St performance overnight, Asian markets ended mostly higher in cautious trade as investors awaited the US CPI print tonight, which would set the Fed’s trajectory in its attempt to tackle inflation. Sentiment was also boosted by hopes of a downshift in the Fed's rate hike trajectory (following a 425 bps hikes in 2022) after Powell’s speech in Sweden that abstained from commenting on the outlook for monetary policy, contrasting with some hawkish messages from his colleagues earlier this week. Overnight, the Dow surged 269 pts to 33,973 in anticipation of cooler inflation reading ahead of tonight’s Dec CPI report and a less hawkish stance from Fed President Susan Collins that she is leaning towards a smaller rate hike of 25 bps during the 31 Jan-1 Feb FOMC meeting, to allow the central bank more time to assess the incoming data.

Malaysia. Tracking regional markets’ cautious tone, KLCI inched up 2.7 pts to 1,487.8 in a listless mode after hovering within 1,484-1,489 range. Market breadth (gainers/losers ratio) improved to 1.69 from 0.78 previously, while trading value jumped 14% to RM2.18bn. Local institutions turned net buyers for a 3rd day (RM99m, Jan: +RM69m) whilst local retailers (- RM25m, Jan: -RM52m) and foreign investors (-RM74m, Jan: -RM17m) emerged as net sellers on equities.

TECHNICAL OUTLOOK: KLCI

With KLCI still holding up above the uptrend channel, we reiterate our view that the index’s near-term uptrend may continue. A successful close above 1,491 (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 1,478 now would set off a fall towards the 1,436–1,454 zones.

MARKET OUTLOOK

Barring a decisive breakdown 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: 1,500- 1,512-1,528), supported by the benchmark's undemanding CY2023 valuation (12.5x P/E vs 10Y mean 16.9x), expectations of stable KLCI core earnings growth of ~7% in 2023E (vs. - 6% in 2022E), low foreign shareholding (Dec 2022: 20.6% vs all-time low of 20.1% in Aug), and more investors returning from year-end holidays. Technically, ABMB’s (HLIB-HOLD RM4.05 TP) share price may see further upside towards RM3.82-3.93-4.00 after closing above multiple key MAs, supported by bottoming up technicals. Major supports are situated at RM3.50-3.58 levels.

Source: Hong Leong Investment Bank Research - 12 Jan 2023