Upside bias amid bullish momentum with short term hurdles at 1,502-1,512-1,528 levels 

KLCI: 1487.61 (10.3)

DOW: 37466.11 (25.8)

MSCI Asia: 165.97 (0.2)

FCPO (RM): 3682 (25)

BRENT (USD): 78.76 (1.17)

USDMYR: 4.6553 (0.02)

SGDMYR: 3.4964 (0.004)

EURMYR: 5.0805 (-0.003)

AUDMYR: 3.1108 (-0.015)

GBPMYR: 5.8938 (-0.003)

US: 10-yr yield (%) 4.0457 (0.047)

BNM:10-yr yield (%) 3.88 (0.03)

Asia/US. Asian markets ended mixed as investors awaited the key US Dec non-farm payrolls and lingering worries about China’s economy following Fitch’s downgrade on China’s four major state-owned asset managers, coupled with uncertainty over the fresh stimulus timeline to kickstart a tepid economy. The Dow gained 26 pts at 37,466 (-233 pts WoW) as investors weighed a surprisingly upbeat Dec payrolls (216k, forecast: 170k) and accelerated wages growth (4.1%, forecast: 4%), as well as a weak ISM Services PMI (50.6, forecast: 52.6). This week, the main focus will be on the start of the 4Q23 results season and the Dec inflation rate (11 Jan), followed by the PPI prices (12 Jan) and Fed officials’ speeches to assess the future path of US monetary policy. 

Malaysia. Led by a strong foreign buying interests for a 3rd straight day, KLCI soared 10.3 pts to 1,487.6, led by YTL, YTLPOWR, CDB, PBBANK, CIMB and AXIATA. Market breadth remained positive for a 4th straight day at 2.13 vs 1.49 a day ago, supported by a 3.9% jump in trading volume to 6.6bn shares valued at RM3.74bn (+58% higher than average trading value of RM2.34bn in Dec). Foreign investors (+RM128m, Jan: +RM524m, Dec: +RM257m) were the major net buyers while local institutions (-RM25m, Jan: -RM141m, Dec: -RM165m) and local retailers (-RM103m, Jan24: -RM383m, Dec:-RM92m) emerged as the net sellers. 

Outlook. Ahead of the signing of a MOU for the Johor-Singapore SEZ on 11 Jan, more newsflow on the HSR, and the coronation of the 17th Agong (31 Jan), KLCI’s recent strong breakout above the stiff 1,465-1,471 may drive the index towards 1,500-1,528 zones, as a more stable political climate domestically will support further government’s continuous reforms and execution of its macro blueprints to bring the country’s economy and balance sheet back on stronger footing. Sentiment is also likely to improve on hopes of further foreign inflows (3rd straight month of net buying amounting to RM2.33bn from Nov-Jan) from an all-time low Dec foreign shareholding of 19.5%, and rising risk appetite for the laggard Bursa Malaysia with the Fed’s pivot and undemanding KLCI’s CY 2024 P/E at 13.4x (vs 10Y mean 16.6x).   

Source: Hong Leong Investment Bank Research - 8 Jan 2024