Sentiment Turns Edgy on Fed’s Restrictive View And, ACE & Lower Liners’ Rout   

KLCI: 1493.87 (-7.2)
DOW: 37361.12 (-231.9)
MSCI Asia: 164.97 (-2.7)
FCPO (RM): 3858 (-4)
BRENT (USD): 78.29 (0.14)
USDMYR: 4.6945 (0.024)
SGDMYR: 3.5033 (0.002)
EURMYR: 5.1107 (-0.002)
AUDMYR: 3.1005 (-0.009)
GBPMYR: 5.9341 (-0.01)
US: 10-yr yield (%) 4.0581 (0.119)
BNM:10-yr yield (%) 3.846 (0.042)

Asia/US. Ahead of the key China’s GDP, industrial production and retail sales data today, Asian markets ended mostly lower as the ECB tempered expectations of premature rate cuts. Sentiment was also dampened by lingering concerns about China's economic outlook after Reuters' latest poll revealed a tepid China's GDP growth that could slow to 4.6% in 2024 and 4.5% in 2025, respectively. The Dow tumbled 232 pts to 37,361 while US10Y bond yield jumped 12 bps to 4.06%, as investors weighed the ongoing 4Q23 earnings season, as well as Fed’s Waller remark that the central bank may ease monetary policy slower than market expectations amid positive US economy and labour markets. On earnings front, Goldman Sach’s (+1%) earnings topped estimates while Morgan Stanley’s (-4%) profit disappointed consensus estimates.

Malaysia. Tracking the sluggish regional markets and persistent profit taking after two unsuccessful attempts to surpass the 1,504 (14M high) barrier, KLCI slipped 7.2 pts or 0.5% to 1493.8 while more selldown were seen on FBM Small Cap (-1.7%) and ACE (-3.4%) indices. Market breadth slid to 0.42 from 1.26 a day ago, with both volume and value jumped 17% and 15% respectively, reaching 5.8bn shares worth RM3.5bn amid knee-jerk selloff. Local institutions (-RM67m, Jan: -RM67m, Dec: -RM165m) and retailers (-RM27m, Jan24: -RM475m, Dec: -RM92m) were the major net sellers whilst foreign investors (+RM94m, Jan: +RM542m, Dec: +RM257m) emerged as major net buyers for a 2nd day. 

Outlook: In wake of the Fed’s Waller restrictive remarks and investors are awaiting more clarity from China’s GDP release today and upcoming stimulus measures to boost its ailing economy, KLCI may experience near term volatility (supports: 1,465-1,471-1,482; resistance: 1,504-1,512-1,528 zones). Downside is likely to be well-cushioned 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 - 17 Jan 2024