The Bullish Triangle Breakout Could Spur Greater Upside Towards 1,465-1,488 Hurdles

KLCI: 1456.3 (8.2)
DOW: 37248 (158)
FCPO (RM): 3688 (18)
BRENT (USD): 76.6 (2.3)
USDMYR: 4.672 (-0.03)
SGDMYR: 3.513 (0.01)
EURMYR: 5.094 (0.02)
GBPMYR: 5.918 (0.02)
US: 10-yr yield (%) 3.92 (-0.10)
BNM:10-yr yield (%) 3.73 (-0.12)

Asia/US. Asian markets rallied amid dovish Fed and sinking yields, overshadowed lingering concerns over China’s economic health as investors await China’s industrial production, retail sales and unemployment figures today. The Dow soared 158 pts to close at all-time high of 37,248 while the US10YT yield slid 10 bps to 3.92%, taking cues from the Fed’s dovish tilt and optimism on a soft economic landing, as the stronger-than-expected US retail sales and a decline in weekly jobless claims failed to shift investors' expectations significantly. Yesterday, the Fed held rates unchanged for the 3rd consecutive meeting in Dec and set the table for further multiple cuts in 2024 (minimum 75 bps) and 2025 (minimum 100 bps) in anticipation for easing inflation threat. Fed officials now see core inflation falling to 3.2% in 2023 and 2.4% in 2024, subsequently to 2.2% in 2025 and back to the 2% target in 2026. 

Malaysia. After falling 14.4 pts last week, KLCI ended higher for the 3rd consecutive day (+0.9-pt to 1,448) as investors weighed PM’s new cabinet team and brace for the key inflation readings and global major central banks’ policy updates. Market breadth (G/L ratio) rebounded to 1.29 from 0.8 a day ago. After net selling RM448m in the last eight consecutive session, foreign investors turned net buyers (+RM125m, Dec: -RM211m, YTD: -RM2.82bn) while local retailers (-RM90m, Dec: -RM18m, YTD: -RM0.90bn) and local institutions (-RM35m, Dec: +RM229m, YTD: +RM3.71bn) emerged as the major net sellers. 

Outlook. Mirroring the extended rally from Wall St, KLCI is expected to rechallenge immediate resistance at 1,465-1,475 levels before heading towards the more formidable clusters near 1,488-1,500 zones. The optimism is supported by (i) Fed’s pivot and optimism of a soft landing in the US economy; (ii) the traditional year-end window dressing effect (92% positive hit rate in Dec since the GFC); (iii) an uptick in Nov shareholding from all-time low in Oct (Oct: 19.5%, Nov: 19.6%), (iv) improved core corporate earnings outlook -0.3%/+8.0% for CY23/24, accompanied by end-2023/2024 KLCI targets at 1,490/1,550 levels and (v) policy continuity and execution by the Unity Government amid easing political risk premium. 

Source: Hong Leong Investment Bank Research - 15 Dec 2023