Upside Is Capped at 1,465-1,475 Zones Amid Ongoing Reporting Season

KLCI:    1456.9 (-3.8)
DOW:    35151 (+204)
FCPO (RM): 3934 (+3)
BRENT (USD):    82.0 (+1.4)
USDMYR: 4.668 (-0.01)
SGDMYR: 3.485 (+0.01)
EURMYR: 5.105 (+0.03)
GBPMYR: 5.839 (+0.03)
US: 10-yr yield (%) 4.42 (-2bps)
BNM:10-yr yield (%) 3.86 (+2bps)

Asia/US. Asian markets ended mildly higher ahead of the widely-anticipated Nvidia’s quarterly earnings (21 Nov) and Nov FOMC meeting minutes (22 Nov). Sentiment was also helped by a rebound in China’s property stocks after regulators vowed to provide more policy support to the beleaguered real estate sector. Meanwhile, the PBOC left its 1Y & 5Y LPRs steady at 3.45% and 4.2%, respectively (within expectations) as authorities continued to assess the impact of the latest stimulus measures on the economy. Ahead of the Nov FOMC meeting minutes, the Dow jumped 204 pts at 35,151, lifted by the all-time high in Microsoft (after news that Sam Altman would lead Microsoft’s new AI team) and Nvidia’s (served as a barometer of AI demand) share prices. Sentiment was also boosted by a 2M low in the UST10Y yield (-2 bps to 4.42%) following a robust demand for a 20Y US treasury bonds, as well as recent soft data reinforced view that the Fed is done with its tightening campaign.

Malaysia. KLCI extended its decline (-3.8 pts to 1,456.9) for a 3rd straight session amid cautious mood due to ongoing results season. Market breadth fell to 0.79 from 0.98 last Friday, whilst daily value continued to shrink by 10% to RM1.7bn. Foreigners (+RM7m, Nov: +RM1.04bn, YTD: -RM3.12n) and local institutions (+RM11m, Nov: -RM732m, YTD: +RM4.16bn) emerged as the major net buyers while local retailers (-RM18m, Nov: -RM309m, YTD: -RM1.05bn) were the sole net sellers. 

Outlook. We expect KLCI to build a base at 1,433-1,447 levels amid the ongoing results season before charging higher in Dec in tandem with the traditional year-end window dressing effect (92% positive hit rate in Dec since the GFC). Reiterate buy on dips approach, underpinned by (i) easing US-China tensions following the symbolic Biden-Xi meeting; (ii) potential affirmation from the Nov FOMC minutes that Fed rates could have peaked; (iii) the absence of escalation in the Israel-Hamas conflict; (iv) positive news that Malaysia has secured a total of RM63bn in proposed investments in the US at the recent APEC summit.

VIRTUAL PORTFOLIO We had squared off our position on CNERGEN yesterday at RM0.62 (8.8% loss) amid weakening technicals.

Source: Hong Leong Investment Bank Research - 21 Nov 2023