KLCI to Build a Base Near 1,436-1,450 Levels Before Resuming Its Upward Trajectory

KLCI: 1453.1 (-1.6)
DOW: 37715.04 (25.5)
MSCI Asia: 168.18 (-1.2)
FCPO (RM): 3628 (-32)
BRENT (USD): 75.89 (-1.15)
USDMYR: 4.6058 (0.012)
SGDMYR: 3.4817 (0.004)
EURMYR: 5.0732 (-0.003)
AUDMYR: 3.1418 (0.016)
GBPMYR: 5.8574 (0.021)
US: 10-yr yield (%) 3.93 (0.05)
BNM:10-yr yield (%)  3.75 (0.01)

Asia/US. Asian markets ended mostly lower on profit taking after 2023’s strong gains, as investors weighed the mixed China’s factory data in Dec from the official general PMI (dropped to 12M low) and the private Composite PMI (rose to 4M high). Sentiment was also dented by rising geopolitical tension in Middle East and oil prices after Iran has deployed a warship to the Red Sea. Ahead of the release of key economic data this week, Wall St ended mixed as the Dow gained 25 pts in a volatile trade while the Nasdaq tumbled 1.6% to 14,765 on profit taking after rallying 43% in 2023. Major economic events to monitor this week are the ISM manufacturing, job openings, Dec FOMC minutes, non-farm payrolls and ISM services reports. 

Malaysia. Tracking regional markets and the lack of fresh catalysts, KLCI lost 1.6 pts to 1,453.1. Despite the headline loss, sentiment was positive with gainers led losers by 512 vs 463. Foreign investors turned net sellers for a 2nd day (-RM23m, YTD24: -RM23m) whilst local institutions (+RM12m, YTD24: +RM12m) and local retailers (+RM11m, YTD24: +RM11m) emerged as the major net buyers. 

Outlook. Despite softer global environment and mildly higher Malaysia’s 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 1,470-1,490 zones. 

Source: Hong Leong Investment Bank Research - 3 Jan 2024