MARKET REVIEW

Asia/US. Tracking Wall St’s tech-led rally (23th Jan), Asian markets rallied as sentiment was bolstered by the Fed's less hawkish stance that sparks hope for a slower rate hike (consensus: +25bps vs previous: +50bps) in the upcoming meeting (1st Feb). Markets are also betting that the Chinese economy will be substantially boosted by the week-long holiday, especially after the country lifted most anti-COVID restrictions and reopened its borders. Overnight, U.S. stocks finished mostly lower with only the Dow clinging to gains for the session as investors digested more earnings reports from major American companies. The S&P 500 shed 0.1% (at 4,016), while the Nasdaq Composite 0.3% (at 11,344) after back-to-back gains. The Dow, however, gained 104 points, or 0.3%, to finish at roughly 33,734.

Malaysia. Ahead of CNY long holidays, KLCI ended 4.1pts higher at the physiological level of 1,500.3. Market breadth (gainers/losers ratio) improved to 1.64 from 1.05 a day ago, but traded volume deteriorated to 1.71bn from 1.90bn a day ago. Foreign institutions turned net sellers for a third day (-RM7.3m, Jan: -RM141m) followed by local retailers (-RM79.1m, Jan: -RM465m), which recorded their net outflows for ten consecutive session. Meanwhile, Local institutions turned out to be net purchasers for nine out of ten sessions (+RM86.4m, Jan: +RM606m).

TECHNICAL OUTLOOK: KLCI

As long as KLCI holds up above the support trend line and 200D MA near 1,488, we reckon the bulls will have the upper hand to retest 1,518-1,528 in the short term. Conversely, a decisive break down below the support trend line would trigger a selloff towards 1,454- 1,468 zones.

MARKET OUTLOOK

By compiling KLCI's past 10 years performance during the CNY, we note that seven out of ten times KLCI registered a lower trading value WoW in the week after Yuan Dan (the first day of Chinese New Year), which could indicate a tepid market for this week. Despite this, we continue to see uptick bias in KLCI following last Friday's decisive breakout above 1,500 hurdle that will spark further buying interest. This is also supported by the undemanding KLCI CY2023 valuation (12.5x P/E vs 10Y mean 16.9x), and low foreign shareholding (Dec 2022: 20.6% vs all-time low of 20.1% in Aug). We highlight that CAPITALA, GENM, CARLSBERG, SUNWAYREIT, IGBREIT, and HEIM are among the companies that will benefit from the CNY.

Source: Hong Leong Investment Bank Research - 25 Jan 2023