Extended Consolidation as Nov Results Season Gathers Steam

KLCI:    1453.3 (-2.6)
DOW:    35151 (0.0, Thanksgiving)
FCPO (RM): 3951 (-37)
BRENT (USD):    81.42 (-0.54)
USDMYR: 4.6803 (+0.0)
SGDMYR: 3.4946 (+0.01)
EURMYR: 5.1125 (+0.01)
GBPMYR: 5.8777 (+0.02)
US: 10-yr yield (%) 4.40 (0.0)
BNM:10-yr yield (%) 3.80 (-0.05)

Asia/US. Mirroring gains on Wall Street, Asian markets ended mildly higher amid optimism that the Fed may be done raising interest rates and that the US economy is still resilient. Sentiment was also lifted by reports that the Chinese government added more cash-strapped property firms to a list of developers eligible for a range of financial support, aiming to ease the beleaguered housing market. US markets were closed overnight due to the Thanksgiving holiday, following a 185-pt gain in the Dow a day before. Tonight, attention turns to the Nov flash PMI manufacturing and services data, providing a key insight into the strength of the US economy after approximately 20 months of the Fed's policy tightening.

Malaysia. Bucking an overnight rally on Wall St, KLCI ended 2.6 pts lower to 1,453.3 (its 5th decline in the last 6 days), as investors weighed the ongoing Nov results season and the absence of fresh catalysts. Market breadth stayed weak at 0.78 vs 0.71 previously. Foreigners remained as the major net buyers for the 4th straight session (+RM74m, Nov: +RM1.38bn, YTD: -RM2.77bn) while local institutions (-RM66m, Nov: -RM1.07bn, YTD: +RM3.83bn) and local retailers (-RM8m, Nov: -RM314m, YTD: -RM1.05bn) retained their selling momentum.  

Outlook. Barring a downbeat Nov results season and decisive fall below 1,444-1,450 levels, the odds would still favour the bulls to spur KLCI higher in Dec (YE target 1,530) in tandem with the traditional year-end window dressing effect (92% positive hit rate in Dec since the GFC), supported by a resumption of foreign net buying (Oct: -RM2.19bn, Nov MTD: +1.38bn). Reiterate buy on dips approach, underpinned by (i) Easing US-China tensions following the symbolic Biden-Xi meeting; (ii) Expectations of an end to the Fed’s rate hikes campaign; (iii) The absence of escalation in the Israel-Hamas conflict and (iv) Undemanding KLCI’s 13.1x CY2024 P/E (vs 10Y average 16.7x) accompanied by an all-time low of foreign shareholding 19.5% (as at Oct 2023).

VIRTUAL PORTFOLIO Yesterday, we squared off our positions on EG (4.9% gain) and LGMS (2% gain) due to expiry.

Source: Hong Leong Investment Bank Research - 24 Nov 2023