Range Bound Pattern Between 1,447-1,476 Levels Amid Ongoing Reporting Season

KLCI:    1460.7 (-4.0)
DOW:    34947 (+2)
FCPO (RM): 3931 (-67)
BRENT (USD):    80.6 (+3.2)
USDMYR: 4.6805 (-0.01)
SGDMYR: 3.4788 (+0.00)
EURMYR: 5.0795 (-0.01)
GBPMYR: 5.8089 (-0.00)
US: 10-yr yield (%) 4.44 (+0.0)
BNM:10-yr yield (%) 3.84 (-0.01)

Asia/US. Asian markets ended mixed, with technology stocks experiencing a rout following Alibaba's decision to abandon plans to spin off its cloud business due to US chip export curbs. Sentiment was further affected by a lack of meaningful positive news from the Biden-Xi talks and persistent headwinds in China's property sector. The Dow gained 2 pts at 34,947 (WoW: +664 pts) while the US10YT yield ended flat at 4.44% (-19 bps WoW) as investors assessed a recent stream of lacklustre economic data, cooling inflation and labour markets, and underwhelmed 4Q23 corporate earnings, fostering hopes of an end to the Fed’s rate-hiking campaign. This week, updates on manufacturing and services sector, the housing market, and Nov FOMC meeting minutes will provide an insight how the Fed will strike a delicate balancing act to rein in prices without triggering a recession.

Malaysia. In line with the profit taking pullback in reginal markets, KLCI fell 4 pts at 1,460.7 as investors weighed the 3Q23 GDP announcement and ongoing results season. Market breadth edged up to 0.98 from 0.86 a day ago, with daily value continued to contract by 9% to RM1.89bn. Foreign institutions turned net sellers (-RM59m, Nov: +RM1.03bn, YTD: -RM3.12n), while local institutions (+RM55m, Nov: -RM743m, YTD: +RM4.15bn) and retailers (+RM4m, Nov: -RM290m, YTD: -RM1.03bn) emerged as net buyers. 

Outlook. Anticipating an end to the Fed’s end of tightening campaign, coupled with positive news that Malaysia has secured a total of RM63bn in proposed investments in the US at the recent APEC summit, KLCI is poised to overcome the formidable hurdles at 1,465-1,471 zones. 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 - 20 Nov 2023