MARKET REVIEW

Asia/US. Despite an overnight rally from Wall St, most Asian market wavered ahead of the FOMC meeting (1 Feb) and US Jan payrolls (3 Feb) print. The US central bank is set to unveil a lower 25 bps rate hike (from 50 bps in Dec) to 4.50-4.75% and investors will be keenly parsing Powell’s comments for signs of less restrictive policy amid cooling inflation after 7th hikes totalling 4.25% since Mar 2022. The US 10Y bond yield slid 9 bps to 3.42% while Dow oscillated between -505 pts and +248 pts before settling +7 pts at 34,093 as investors weighed a litany of economic data (i.e ISM manufacturing, ADP payroll and job openings) vs Powell’s comment (Fed raised rates by 25 bps as expected) that the central bank has made progress in its battle against inflation, even as he warned rates need to be sufficiently restrictive to return inflation to 2% over time. On corporate front, AMD and META share prices rallied on upbeat earnings whilst SNAP tumbled following a downbeat earnings.

Malaysia. Despite better-than-expected China’s manufacturing and services activities in Jan coupled with the latest IMF’s less gloomy global economic outlook (vs Oct 22 forecast), KLCI tumbled 13.9 pts on 31 Jan (-0.4% Mom), mainly dragged by persistent foreign outflows and a lack of domestic fresh catalysts. Market breadth (gainers/losers ratio) tumbled to 0.52 from 1.01 a day ago. Foreign institutions (-RM99m, Jan: -RM348m) extended their net outflows for a 8th consecutive session, whilst local institutions (+RM59m, Jan: +RM755m) and retailers (+RM40m, Jan: -RM407m) emerged as net buyers.

TECHNICAL OUTLOOK: KLCI

Following the breakdown below the major support trendline from 1,373, KLCI near term uptrend could be temporary disrupted. A decisive close further below 200D MA (1,485) could drive the benchmark lower to retest 1,451-1,468-1,479 zones. Only a successful reclaim above 1,500 would spur the index to revisit 1,512-1,528 zones.

MARKET OUTLOOK

Although KLCI near term outlook remains positive amid China reopening and near peaking interest rate upcycle, we expect the benchmark to trend range bound in the absence of fresh local catalysts (resistance: 1,500-1,512-1,528, supports: 1,451-1,468-1,479) following a technical support trendline breakdown, with key focus on Feb results season and the re tabling of Budget 2023. Technically, CTOS will need convincing breakout above the RM1.58 (9M high) to fuel upside momentum towards the RM1.63-1.70 hurdles, while the RM1.44 (50D MA) and RM1.48 (20D MA) levels are likely to cushion downside.

Source: Hong Leong Investment Bank Research - 2 Feb 2023