MARKET REVIEW

Asia/US. Asian markets mostly gained as sentiment was bolstered by cooler US Dec inflation print, China’s exit from its zero-Covid policy as well as better-than-expected China’s Dec trade data in the midst of weakening global and domestic demand. The Dow tumbled as much as 274 pts despite upbeat earnings from mega banks’ 4Q22 results as they are increasing the amount of money set aside for credit losses ahead of a possible recession in 2023. However, the benchmark recouped the losses to end +112 pts to 34,302 (+2% WoW) as sentiment was boosted by a strong Jan consumer sentiment index and easing short-term inflation expectations. This week, the spotlight will be taken by World Economic Forum at Davos (16-20 Jan), PPI (18 Jan), housing starts (19 Jan) and earnings reports for several major corporations (e.g. Goldman Sachs, Morgan Stanley, P&G, Americans Airlines, Netflix).

Malaysia. In line with higher regional markets, KLCI gained for the 3rd consecutive session to end +6.4 pts at 1,495 (+14.5 pts WoW), led by bargain hunting on heavyweights i.e. PMETAL, DIGI, MAYBANK, PBBANK, TENAGA and PCHEM. Market breadth (gainers/losers ratio) improved to 1.36 from 0.94 last Thursday. Local institutions turned net buyers for a 5th straight session (RM27m, Jan: +RM214m) while local retailers (-RM68m, Jan: -RM242m) increased their net outflows for the 5th straight day ahead of the upcoming CNY. Meanwhile, after net selling RM90m from 9-11 Jan, foreigners (+RM41m, Jan: - RM14m) emerged as net buyers on equities for a 2nd straight day.

TECHNICAL OUTLOOK: KLCI

Following the successful closing above 200D MA last Friday, the bulls would have the upper hand to retest 1,512-1,528 in the short term. Conversely, a decisive break down below the support trend line (near 1,480 now) would trigger a selloff towards 1,454-1,468 zones.

MARKET OUTLOOK

Buoyed by hopes for the Fed for rate-hike downshift on cooling inflation and China’s borders reopening, we reckon that the KLCI will post back-to-back gains in January (resistance: 1,500-1,512-1,528), supported by (1) improving technical outlook following a successful closing above 200D MA last Friday, (2) undemanding KLCI CY2023 valuation (12.5x P/E vs 10Y mean 16.9x), (3) low foreign shareholding (Dec 2022: 20.6% vs all-time low of 20.1% in Aug), and (4) expectation of OPR to peak at 3.25% amid expectations for BNM to raise OPR by another 25 bps each on 19 Jan and 9 Mar.

Source: Hong Leong Investment Bank Research - 16 Jan 2023