Volatility resumes with major supports located at 1,465-1,471 zones

KLCI: 1483 (-3.9)
DOW: 37711.02 (15.3)
MSCI Asia: 166.55 (1.5)
FCPO (RM): 3796 (2)
BRENT (USD): 77.41 (0.61)
USDMYR: 4.644 (0.002)
SGDMYR: 3.4914 (0.005)
EURMYR: 5.0917 (0.01)
AUDMYR: 3.1166 (0.002)
GBPMYR: 5.9163 (0.009)
US: 10-yr yield (%) 3.9658 (-0.062)
BNM:10-yr yield (%) 3.849 (-0.002)

Asia/US. Ahead of the US inflation data and the start of 4Q23 results season, coupled with the release of China inflation and trade figures, Asian markets ended mostly higher, spurred by the robust NIKKEI 225 (closed at 34Y high) as BOJ’s pivot bets fade amid subdued inflation and a weaker yen, which benefitted exporters. Sentiment was also boosted by mounting bets of policy easing from the PBOC to rejuvenate its struggling economy. The Dow tumbled as much as 272 pts before ending +15 pts at 37,711 as investors evaluated the hotter-than-expected US Dec CPI and Fed officials’ remarks that lowering rates in March is probably premature amid sticky inflation. Sentiment was also cautious as Wall St is kickstarting the 4Q23 earnings season, with BAC, JPM, WFC, C and UNH scheduled to unveil their results tonight.

Malaysia. After rallying from 1,446.4 (2 Jan) to a high of 1,503.9 (9 Jan), KLCI continued its healthy consolidation for a 2nd session (-3.9 pts to 1,483). Market breadth was negative for a 3rd day (0.71 vs 0.61 a day ago) while trading volume shrank 7% to 4.63bn shares worth RM3bn. Local retailers were the major net buyers for a 2nd day (+RM36m, Jan24: -RM391m, Dec: -RM92m) followed by local institutions (+RM5m, Jan: -RM42m, Dec: -RM165m) whilst the foreign investors (-RM41m, Jan: +RM433m, Dec: +RM257m) emerged as major net sellers for a 3rd straight session.

Outlook: We expect current healthy consolidation to continue for a while to further neutralise overbought conditions. 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 17.2x). Major supports for Jan are 1,450-1,465-1,471 whilst stiff resistances are located near 1,490-1,504-1,512 zones.

Source: Hong Leong Investment Bank Research - 12 Jan 2024