Consolidating at 1,465-1,480 Range Before Revisiting 1,504-1,512-1,528 Zones

KLCI: 1487.34 (4.3)
DOW: 37592.98 (-118)
MSCI Asia: 167.54 (1)
FCPO (RM): 3856 (62)
BRENT (USD): 78.29 (0.88)
USDMYR: 4.6477 (0.004)
SGDMYR: 3.492 (0.001)
EURMYR: 5.0951 (0.003)
AUDMYR: 3.1138 (-0.003)
GBPMYR: 5.927 (0.011)
US: 10-yr yield (%) 3.939 (-0.027)
BNM:10-yr yield (%) 3.8 (-0.01)

Asia/US. Asian markets ended mixed as investors weighed hotter-than-expected US Dec CPI and restrictive Fed official remarks, despite an extended rally on NIKKEI 225 (+527 pts to 34Y high at 35,577) amid BOJ’s dovish policy and a weaker yen. Sentiment was also dampened by persistent deflationary concerns in China (CPI fell for the 3rd straight month whilst PPI dropped for the 15th consecutive month) amid a struggling economy. The Dow slipped 118 pts to 37,593 (+127 pts WoW) as investors evaluated softer-than-expected PPI data, as well as lower-than-expected profit from major banks and UNH. This week, major economic data due includes retail sales, Michigan consumer confidence and housing indicators whilst key earnings on tap are from MS, GS, USB, TRV, PNC, etc.

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 3rd session to as low as 1,482 levels before ending +4.3 pts to 1,487.3 (-0.3pt WoW). Market breadth was 1.01 vs 0.71 a day ago while trading volume and value fell 12.7% and 5.7% to 4.1bn shares worth RM2.8bn, respectively. Local retailers were the net sellers (-RM4m, Jan24: -RM395m, Dec: -RM92m) followed by foreign investors (-RM1m, Jan: +RM432m, Dec: +RM257m) whilst local institutions (+RM5m, Jan: -RM37m, Dec: -RM165m) emerged as major net buyers. 

Outlook: We expect current healthy consolidation to continue for a while before resuming an upward trajectory towards 1,504-1,512-1,528 levels. Downside is likely to be well-cushioned by favourable domestic leads (e.g. 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 13.4x (vs 10Y mean 17.2x). 

Source: Hong Leong Investment Bank Research - 15 Jan 2024