Risk-on Mode to Continue With Key Upside Targets at 1,512-1,528-1,548 Zones 

KLCI: 1501.11 (13.8)
DOW: 37592.98 (0)
MSCI Asia: 167.67 (0.1)
FCPO (RM): 3821 (3)
BRENT (USD): 78.15 (-0.14)
USDMYR: 4.6707 (0.023)
SGDMYR: 3.5013 (0.009)
EURMYR: 5.1129 (0.018)
AUDMYR: 3.1095 (-0.004)
GBPMYR: 5.9438 (0.017)
US: 10-yr yield (%) 3.939 (0)
BNM:10-yr yield (%) 3.81 (0.01)

Asia/US. Asian markets ended cautiously higher, boosted by a 34Y high of the Nikkei 225 following the weak yen, ultra-loose monetary settings and strong corporate earnings. Investors also weighed on the unexpected PBOC’s move to maintain its 1Y lending rate at 2.5% coupled with the geopolitical developments in the region after Lai Ching-te, considered a strong China skeptic, helped secure a third-straight victory for the ruling DPP in Taiwan’s presidential election. Wall St was closed overnight due to the Martin Luther King holiday. This week, major economic data due includes retail sales, consumer confidence and housing indicators whilst key earnings on tap are from MS, GS, USB, TRV, PNC, etc.

Malaysia. After a mild consolidation last week, KLCI resumed its upward momentum, jumping 13.8 pts to 17M high at 1,501.1 as foreign buying interests returned after 4 days of net selling. Market breadth improved further to 1.26 vs 1.01 last Friday while volume and value fell 12.7% and 5.7% to 4.1bn shares worth RM2.8bn, respectively. Local retailers were the major net sellers (-RM52m, Jan24: -RM447m, Dec: -RM92m) whilst local institutions (+RM36m, Jan: -RM1m, Dec: -RM165m) and foreign investors (+RM16m, Jan: +RM448m, Dec: +RM257m) emerged as major net buyers. 

Outlook: Following yesterday’s bullish momentum, we expect KLCI to retest immediate hurdles at 1,504-1,512, a decisive breakout above these levels may spur greater upside towards stiffer resistance at 1,528-1,548 zones. Downside is likely to be well-cushioned with key support at 1,465-1,484 levels by favourable domestic leads (e.g. economic transformation blueprints 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 - 16 Jan 2024