Extended Consolidation With Key Supports at 1,462-1,471 Territory 

KLCI: 1479.18 (-12)
DOW: 37468.61 (201.9)
MSCI Asia: 162.07 (0.3)
FCPO (RM): 3885 (-10)
BRENT (USD): 79.1 (1.22)
USDMYR: 4.719 (0.002)
SGDMYR: 3.5118 (0.002)
EURMYR: 5.1364 (0.005)
AUDMYR: 3.0973 (0.006)
GBPMYR: 5.9811 (-0.001)
US: 10-yr yield (%) 4.142 (0.04)
BNM:10-yr yield (%) 3.84 (-0.03)

Asia/US. Asian bourses ended lower as stronger-than-expected US economic data fuelled Fed’s pivot repricing. Sentiment was also dampened by China’s reluctance in launching massive stimulus despite growing deflation pressure and a property downturn. After sliding 445 pts in three straight session, Dow rebounded 202 pts to 37,468, boosted by a rally in mega tech stocks following TSMC’s upbeat results and guidance, as well as rating upgrade on Apple. Meanwhile, the US10Y bond yield rose 4 bps to 4.14% following falling weekly jobless claims to 16M low and Fed President Bostic’s remark that he expects the central bank to start reducing rates in the 3Q24 (contrary to the latest consensus bet in May). 

Malaysia. Mirroring the fall on Wall St and regional markets, KLCI extended its decline for a 3rd day (-12 pts to 1,479.2). Market breadth was bearish at 0.25 from 0.32 a day ago, dented by relentless limit-down losses in selected lower liners on margin calls and forced selling pressures. Local institutions (+RM222m, Jan: +RM193m) were the major net buyers whilst retailers (-RM32m, Jan24: -RM506m) and foreign investors (-RM190m, Jan: +RM313m) emerged as key net sellers. 

Outlook. In line with the ongoing Fed’s pivot repricing, heightened geopolitical tensions in the Middle East, and Beijing’s delay in launching meaningful stimulus measures to kickstart its ailing economy, KLCI is expected to consolidate further (supports: 1,462-1,471; resistance: 1,504-1,512 zones). Moreover, sentiment could turn more cautious, triggered by a weak RM (vs USD), coupled with corrections and limit-downs in selected lower liners and ACE stocks lately. Nevertheless, 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 etc), and rising risk appetite for the laggard Bursa Malaysia amid Fed’s expected rate cuts and undemanding KLCI’s CY 2024 P/E at 13.3x (vs 10Y mean 17.2x).

VIRTUAL PORTFOLIO We had squared off our positon on DNEX (6.5% loss) after hitting our cut loss level yesterday.

Source: Hong Leong Investment Bank Research - 19 Jan 2024