MARKET REVIEW

Asia/US. Tracking back-to-back rallies from Wall St overnight, Asian markets ended mostly higher in cautious note ahead of the key US Dec CPI print (6.5% vs forecast 6.7%), which could influence the trajectory of Fed interest rate hikes following a cumulative 425 bps hikes in 2022. Ahead of the start of US 4Q22 results season tonight (i.e. JPMorgan, Bank of America, Citigroup, Wells Fargo, Delta Air, United Health), the Dow recorded its 3rd straight gain (+217 pts to 34,190) after Dec inflation eased for the 6th consecutive month to 6.5% (Nov: 7.1%, peak: 9.1%), bolstering bets on the Fed downshifting to smaller hikes at its 31 Jan-1 Feb FOMC meeting.

Malaysia. In a directionless move, KLCI inched up 0.8-pt to 1,488.7 after hovering within 1,488.6-1,491.4 range. Market breadth (gainers/losers ratio) deteriorated to 0.94 from 1.69 previously, while trading value ballooned 26% to RM2.75bn, mainly driven by the newly listed IPO Nationgate. Local institutions turned net buyers for a 4th straight session (RM119m, Jan: +RM187m) while local retailers (-RM121m, Jan: -RM173m) increased their net ouflows for the 4th straight day. Meanwhile, after net selling RM90m in the last three days, foreigners (+RM2m, Jan: -RM14m) emerged as net buyers 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 should ensue. 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) and low foreign shareholding (Dec 2022: 20.6% vs all-time low of 20.1% in Aug) coupled with hopes for the Fed for rate-hike downshift amid cooling US inflation data. Technically, GFM’s share price may attract buying interests on weakness near 200DMA or RM0.185 in anticipation of a potential MACD golden cross. A successful breakout above RM0.21 (mid BB) will lift the stock to retest RM0.23-0.245 zones.

Source: Hong Leong Investment Bank Research - 13 Jan 2023