Pending a Decisive Breakout Above 1,465-1,471 Hurdles Before Advancing to 1,476-1,492

KLCI:    1464.7 (-2.2)
DOW:    34945 (-46)
FCPO (RM):    3949 (-49)
BRENT (USD):    77.4 (-3.76)
USDMYR: 4.688 (0.0155)
SGDMYR: 3.476 (0.0123)
EURMYR: 5.087 (0.0161)
AUDMYR: 3.045 (0.005)
GBPMYR: 5.813 (-0.0099)
US: 10-yr yield (%) 4.44 (-0.10)
BNM:10-yr yield (%) 3.85 (0.01)

Asia/US*. Asian markets ended lower on profit taking after recent rallies as investors weighed a rebound in bond yields, prompted by a slower-than-expected drop in US retail sales and continued headwinds for the China’s property market amid a sustained decline in house prices through Oct. Also, sentiment turned cautious ahead of the resumption of high-level talks between President Biden and President Xi. The Dow lost 46 pts at 34,945 (off -173 pts intraday) on profit taking after rallying 1,099 pts in four straight session while the US10YT yield fell 10 bps to 4.44%, in response to a slew of weak economic data, including home builder sentiment, manufacturing and industrial output. Coupled with a jump in weekly jobless claims to the highest in nearly three months has fostered hopes of an end to Fed’s rate-hiking campaign to preserve economic growth and ward off looming threat of a recession.

Malaysia. After scoring a strong 21.7-pt gain in two days, KLCI dipped 2.2 pts at 1,464.7, aligning with a retreat in regional markets and awaiting the 3Q23 GDP announcement today. Market breadth fell 0.86 vs 1.66 a day ago, with daily value fell 6% to RM2.07bn. Foreign institutions resumed net buying for a 2nd day (+RM44m, Nov: +RM1.09bn, YTD: -RM3.06n), while local (-RM23m, Nov: -RM798m, YTD: +RM4.1bn) and local (-RM21m, Nov: -RM294m, YTD: -RM1.02bn) investors continued their net outflows. 

Outlook. Anticipating the Fed's potential halt in rate-hike campaign amid a slew of tepid economic data and sliding yields, KLCI is poised to break the formidable hurdles at 1,465-1,471 zones following multiple unsuccessful attempts. Reiterate buy on dips approach to ride on a better 4Q23 (YE target: 1,530), underpinned by: (i) improved risk appetite post state polls and clearer political runway allowing the Unity Government to roll out its strategic plans and reforms; (ii) undemanding KLCI at 13.3x CY2024 P/E (vs 10Y average 16.6x); and (iii) the traditional year-end window dressing effect (92% positive hit rate in Dec since the GFC).

Source: Hong Leong Investment Bank Research - 17 Nov 2023