Eyeing a 1,466-1471 Breakout Before Revisiting the Stiff 1,490-1,500 Barriers

KLCI:    1454.7 (-2.8)
DOW:    37689 (-21)
FCPO (RM):    3721 (-18)
BRENT (USD):    77 (-11)
USDMYR:    4.594 (-0.02)
SGDMYR:    3.478 (-0.02
EURMYR:    5.076 (-0.05)
GBPMYR:    5.837 (-0.06)
US: 10-yr yield (%) 3.88 (0.0)
BNM:10-yr yield (%) 3.74 (0.0)

Asia/US. Asian markets ended mostly higher on the last trading day of 2023, spurred by the Beijing’s commitment in stimulating domestic demand and policy easing, coupled with stimulus measures to revive the beleaguered housing market. Sentiment was also boosted by expectations of a soft landing in the US economy and Fed’s imminent pivot. The Dow eased 21 pts to 37,689 ahead of the extended New year holiday. Despite the fall, the benchmark ended up 4.8% in Dec and 13.7% in 2023, on expectations of the Fed’s rate cuts in 2024, a resilient US jobs market and the US economy is likely to avoid a recession. Major economic events to monitor this week are the ISM manufacturing, job openings, Dec FOMC minutes, non-farm payrolls and ISM services reports. 

Malaysia. Bucking higher regional markets and the absence of window dressing activities, KLCI lost 2.8 pts to end 2023 at 1,454.7 (+1.9 pts MoM, -40.8 pts in 2023). Sentiment remained weak with negative market breadth at 0.89 vs 1.20 a day ago whilst daily trading volume and value jumped 10% and 24% to 4.67bn shares valued at RM2.96bn, respectively. Foreign investors turned net sellers (-RM58m, Dec: +RM257m, 2023: -RM2.35bn) followed by local retailers (-RM1m, Dec: -RM92m, 2023: -RM0.97bn) whilst local institutions (+RM59m, Dec: -RM165m, 2023: +RM3.57bn) emerged as the major net buyers. 

Outlook. Despite softer global environment and mildly higher inflation target in 2024 (due to subsidy rationalisation), Bursa Malaysia should perform better in the medium to long term, led by continuous execution of the macro blueprints launched in 2023, as well as a persistent fiscal reforms to bring the country’s balance sheet back on stronger footing. Further key catalysts are: (i) tail-end of global monetary policy tightening; (ii) continued robust recovery in tourists to Malaysia; (iii) economic transformation via the NETR, NIMP2023 and reinvigoration of developments in Johor; and (iv) rising FDI momentum and stronger core CY24 earnings growth. Major supports for Jan are 1,430-1,450 whilst stiff resistances are located near 1,471-1,490 zones.

Source: Hong Leong Investment Bank Research - 2 Jan 2024