Rotational Plays Extend to Small, Midcap and ACE Stocks as KLCI Consolidates

KLCI: 1486.86 (-12)
DOW: 37695.73 (170.6)
MSCI Asia: 165.04 (-0.2)
FCPO (RM): 3782 (25)
BRENT (USD): 76.8 (-0.79)
USDMYR: 4.642 (0)
SGDMYR: 3.4867 (-0.006)
EURMYR: 5.0819 (0.001)
AUDMYR: 3.1141 (0.002)
GBPMYR: 5.9072 (-0.005)
US: 10-yr yield (%) 4.0283 (0.015)
BNM:10-yr yield (%) 3.851 (-0.009)

Asia/US. Despite NIKKEI 225 skyrocketed to a 34Y high as BOJ pivot bets fade amid tepid inflation, Asian markets ended mixed as investors braced for the US inflation data and the start of 4Q23 results season, China inflation and trade figures, coupled with the impending Taiwan Presidential election outcome this weekend. Despite falling oil stocks amid an unexpected rise in US stockpiles (overshadowed Red Sea risks), the Dow gained 171 pts to 37,696, lifted by a rally in mega tech shares. Sentiment was calm as investors await Dec inflation rate (tonight) and the start of the 4Q23 results season coupled with the PPI prices (12 Jan) to assess the future path of US monetary policy. 

Malaysia. After rallying from 1,446.4 (2 Jan) to a high of 1,503.9 (9 Jan), KLCI finally lost 11.9 pts at 1,486.9 on a healthy profit taking, led by banking, utility and chemical stocks. Market breadth tuned negative for a 2nd day (0.61 vs 0.68 a day ago) while trading volume and value tumbled 23% and 24% to 5bn shares valued at RM2.8bn, respectively. Local retailers were the major net buyers after five consecutive days of net selling (+RM61m, Jan24: -RM427m, Dec: -RM92m) while foreign investors (-RM45m, Jan: +RM474m, Dec: +RM257m) and local institutions (-RM16m, Jan: -RM47m, Dec: -RM165m) emerged as the major net sellers. 

Outlook: After surging almost 46 pts in five straight sessions, KLCI tumbled 11.9 pts at 1,486.9, as investors await the widely watched key events such as i) Anwar-Hsien Loong meeting, (ii) upcoming key US inflation data and the start of the 4Q23 results season, and (iii) the impending Taiwan Presidential election outcome this weekend. Nevertheless, downside is likely to be well-cushioned by favourable domestic leads (eg economic transformation via the NETR, NIMP2023 and reinvigoration of developments in Johor; rising FDI momentum, the return of foreign investors, and rising risk appetite for the laggard Bursa Malaysia amid Fed’s expected pivot and undemanding KLCI’s CY 2024 P/E at 13.3x (vs 10Y mean 16.6x). Major supports for Jan are 1,450-1,465-1,471 whilst stiff resistances are located near 1,502-1,512-1,528 zones.  

Source: Hong Leong Investment Bank Research - 11 Jan 2024