Targeting 1,465-1,476 Zones Amid Traditional Dec Window Dressing Effect and Sliding Yields

KLCI: 1456.4 (4)
DOW: 36245.5 (295)
MSCI Asia 161.8 (0)
FCPO (RM): 3874 (-21)
BRENT (USD): 79.6 (0.71)
USDMYR: 4.674 (0.0122)
SGDMYR: 3.499 (0.0085)
EURMYR: 5.093 (0.0005)
AUDMYR: 3.099 (0.0151)
GBPMYR: 5.920 (0.0227)
US: 10-yr yield (%) 4.20 (-0.13)
BNM:10-yr yield (%) 3.89 (-0.01)

Asia/US. Ahead of Powell’s widely anticipated speech, Asian markets ended mixed on their debut in Dec after a blowout Nov rally, as investor weighed a contrasting China’s economic manufacturing surveys in Nov from the private Caixin PMI (above expectations) against official PMI (below expectations). The Dow rallied 286 pts to a fresh YTD high at 36,237 (+847 pts WoW) while the UST10Y yield slid 12 bps to 4.21% (-27 bps WoW), buoyed by Powell's dovish stance as the Fed vowed to move "carefully" on interest rates following recent batches of cooling economic data. This week, the focus will be on the highly anticipated US labour report, followed by JOLTS jobs openings and the ISM Services PMI, all which are expected to offer insights into the current economic landscape.

Malaysia. KLCI extended its gains for a 2nd day (+3.6 pts at 1,466.4), ending the week 2.4 pts higher. However, market breadth continued its trend in negative territory for the 8th consecutive session at 0.92 vs 0.52 previously. On the 1st trading day of Dec, foreign investors (+RM111m, Nov: +RM1.55bn, YTD: -RM2.49bn) and local retailers (+RM32m, Nov: -RM142m, YTD: -RM0.85bn) continued their net buying trades, matching the net outflows by the local institutions (-RM143m, Nov: -RM1.41bn, YTD: +RM3.34bn), which were dumping shares in 8 of the 9 trading days.  

Outlook. Barring a decisive fall below 1,440 (uptrend line support), the odds would still favour the bulls to resume its ascent in Dec (Oct: +1.3%, Nov: +0.7%), aligning 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 +RM1.55bn 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 and optimism that the US economy is going to avoid a hard landing; (ii) absence of escalation in the Israel-Hamas conflict and (iii) undemanding KLCI’s 13.1x 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 - 4 Dec 2023