To revisit 1,465-1,476 zones amid traditional Dec window dressing effect and no major negative surprises in 3Q23 results wrap

KLCI: 1452.7 (7)
DOW: 35950.9 (520)
MSCI Asia 162.2 (1)
FCPO (RM): 3910 (15)
BRENT (USD): 82.8 (-0.27)
USDMYR: 4.661 (0.009)
SGDMYR: 3.491 (-0.0025)
EURMYR: 5.093 (-0.0129)
AUDMYR: 3.084 (0.0008)
GBPMYR: 5.898 (-0.0014)
US: 10-yr yield (%) 4.33 (0.07)
BNM:10-yr yield (%) 3.90 (0.00)

Asia/US. Asian markets ended higher, propelled by a robust US 3Q23 GDP (fostered optimism that US economy is clear of recession) and recent dovish remarks by the Fed officials. Investors are also anticipating increased support from Beijing following a set of sluggish PMI readings. The Dow rallied 521 pts to a fresh YTD high at 35,951, engineered by a remarkable 9.2% jump in Salesforce (due to upbeat results), a slowdown in PCE inflation measures coupled with a moderation in personal spending, and rising jobless claims (to a 2Y high). Collectively, these fuelled expectations that the Fed is done with its tightening cycle, as the Mar 2024’s rate-cut probabilities soared to 44.9% vs 27.4% a week ago.

Malaysia. Tracking the rally in the Asian markets and the MSCI rebalancing exercise, KLCI jumped 6.7 pts to 1,452.7, led by bargain hunting on CDB, PCHEM, NESTLE, DIALOG, TENAGA and PBBANK. Despite the headline gains, market breadth remained in negative territory for the 7th straight session at 0.52 vs 0.63 previously. Foreign investors returned as net buyers for a 3rd day (+RM31m, Nov: +RM1.55bn, YTD: -RM2.6bn) followed by local retailers (+RM14m, Nov: -RM142m, YTD: -RM0.88bn). In contrast, local institutions resumed their net outflows for a 3rd session (-RM45m, Nov: -RM1.41bn, YTD: +RM3.49bn).  

Outlook. Barring a decisive fall below 1,440 (uptrend line support), the odds would still favour the bulls to resume its ascent in Dec (YE target 1,530), aligns with the traditional year-end window dressing effect (92% positive hit rate in Dec since the GFC). Additionally, signs of improvement in foreign net buying, from -RM2.19bn in Oct to +1.55bn in Nov, further support our optimism.  Reiterate buy on dips approach, underpinned by (i) expectations of an end to the Fed’s rate hikes campaign; (ii) absence of escalation in the Israel-Hamas conflict and (iii) undemanding KLCI’s 13x CY2024 P/E (vs 10Y average 16.6x) accompanied by an all-time low of foreign shareholding 19.5% (as at Oct 2023).

Source: Hong Leong Investment Bank Research - 1 Dec 2023