MARKET REVIEW

Asia/US. Asian markets extended their winning strikes as investors look beyond the near term earnings weakness and 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). The MSCI Asia Pacific index rose 0.8% (third straight day of gains) with the Japan market leading the advance while the China market is still shut for the Lunar New Year. Overnight, the Dow eased as much as 470pts but the loss was erased to end +9.8pts to 33,743 thanks to Microsoft's rebound from intraday lows. Nasdaq, however, was down -20.9pts to 11,313 as heavyweights such as Alphabet and Texas Instruments Incorporated reported earnings that fell short of analysts' projections.

Malaysia. Bucking regional trend, KLCI oscillated between 1,494 and 1501.8 levels throughout the session before ending marginally lower at 1,499.45 (-0.88pts). Market breadth (gainers/losers ratio) remained positive at 2.2 (vs 1.64 a day ago), but traded volume deteriorated to 1.67bn from 1.71bn a day ago. Foreign institutions (-RM26.5m, Jan: RM-168m) extended their net outflow for a 4th session followed by local retailers (- RM30.8m. RM-496m), whilst local institutions emerged as the only net buyer (-RM7.3m, Jan: RM664m).

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 (12.6x 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 - 26 Jan 2023