Sideways Consolidation as We Approach the Peak of the Nov Results Season

KLCI:    1453.9 (0.6)
DOW:    35390 (117)
FCPO (RM):    3890 (-61)
BRENT (USD):    80.6 (-0.84)
USDMYR:    4.685 (0.005)
SGDMYR:    3.494 (-0.0006)
EURMYR:    5.108 (-0.0042)
AUDMYR:    3.077 (0.0054)
GBPMYR:    5.883 (0.0052)
US: 10-yr yield (%)    4.47 (0.06)
BNM:10-yr yield (%)    3.80 (0.00)

Asia/US. Asian markets ended mixed as investors assessed the accelerated Oct inflation in Japan to 3.3% whilst worries over uneven economic recovery in the China re-emerged ahead of Oct’s PMI this week, with lingering worries about Beijing's plans to encourage banks to lend to high-risk developers in the face of weak business mood, shaky demand, and mounting global headwinds. The Dow jumped 117 pts to 35,390 (+443 pts WoW) in a shortened session due to the Thanksgiving break, as markets continued to weigh a sluggish S&P Global US manufacturing PMI vs a better-than-expected services PMI. Key events this week are dominated by the releases of PCE prices, personal income and spending, the ISM Manufacturing PMI, along with speeches from several Fed officials, including Chair Powell. 

Malaysia. After recording a 13.6-pt fall in the last 6 days, KLCI inched up 0.6-pt at 1,453.9 (-6.8pts WoW) as investors weighed the ongoing Nov results season and the absence of fresh catalysts. Market breadth stayed weak at 0.74 vs 0.78 previously, with daily trading value rose 15% to 2.35bn. Foreign investors were the major net buyers for the 5th straight session (+RM34m, Nov: +RM1.38bn, YTD: -RM2.77n) while local institutions (-RM66m, Nov: -RM1.07bn, YTD: +RM3.83bn) and local retailers (-RM8m, Nov: -RM314m, YTD: -RM1.05bn) retained their selling momentum.  

Outlook. KLCI is likely to consolidate sideways as we approach the peak of the Nov results season this week. Barring a downbeat Nov results season and a decisive fall below 1,444-1,450 levels, the odds would still favour the bulls to resume an uptrend in Dec (YE target 1,530) in line 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: +1.42bn).  Reiterate buy on dips approach, underpinned by (i) Expectations of an end to the Fed’s rate hikes campaign; (ii) The absence of escalation in the Israel-Hamas conflict; and (iii) Undemanding KLCI’s 13.1x CY2024 P/E (vs 10Y average 16.7x) accompanied by an all-time low of foreign shareholding at 19.5% (Oct 2023).

Source: Hong Leong Investment Bank Research - 27 Nov 2023