KLCI Finds Some Solace Near 1,468-1,475 Before Revisiting 1,500-1,512 Zones 

KLCI: 1486.37 (7.2)
DOW: 37863.8 (395.2)
MSCI Asia: 163.78 (1.7)
FCPO (RM): 3939 (44)
BRENT (USD): 78.56 (-0.54)
USDMYR: 4.7185 (-0.001)
SGDMYR: 3.5196 (0.008)
EURMYR: 5.135 (-0.001)
AUDMYR: 3.1135 (0.016)
GBPMYR: 5.9847 (0.004)
US: 10-yr yield (%) 4.1226 (-0.019)
BNM:10-yr yield (%) 3.82 (-0.02)

Asia/US. Asian markets ended higher last Friday, led by rallies in Japan (as a 17M low inflation reinforced a dovish BOJ’s policy decision on 22 Jan) and Taiwan (upbeat forecast by TSMC on AI-related demand). However, the gains were capped as investors waited for signs of fresh stimulus measures from Beijing amid a deflationary environment and shaky economic recovery. Dow surged 395 pts to a fresh record high at 37,863 (+270 pts WoW), boosted by a rally in the “Magnificent Seven” fuelled by hopes of the AI boom, sliding year-ahead inflation expectations to a 3Y low, and surging consumer sentiment index to a 30M high. Key data in focus this week includes the advance 4Q23 GDP estimate, PCE Price Indexes, and personal income and spending while major earnings results scheduled are Microsoft, Tesla, Visa, J&J, P&G, Netflix, Intel, Verizon, Abbott, and IBM.

Malaysia. In line with a rebound in Wall St and regional markets, KLCI rose 7.2 pts to 1,486.4 (-1.0 pts Wow), as sentiment was buoyed by SC and Bursa Malaysia’s assurance that the Malaysian stock market fundamentals remain strong as the affected stocks’ melt down constituted less than 0.5% of the total market capitalisation. Foreign investors (+RM53m, Jan: +RM366m) emerged as key net buyers after two days of net selling whilst local institutions (-RM15m, Jan: +RM178m) and local investors (-RM38m, Jan24: -RM544m) emerged as key net sellers. 

Outlook. In sync with the recent Fed’s restrictive remarks, lingering geopolitical tensions in the Middle East, and potential disappointment of Beijing’s stimulus measures, KLCI may continue to remain choppy (supports: 1,468-1,475; resistance: 1,504-1,512 zones), as the recent meltdown’s domino effect in selected small caps and ACE stocks may continue for a while (albeit on a smaller scale). Nevertheless, downside is well-cushioned by favourable domestic leads (e.g. economic transformation blueprints via the NETR, NIMP2023 and reinvigoration of developments in Johor), rising FDI momentum, and rising risk appetite for the under owned Bursa Malaysia by foreigners (with near all-time low shareholding of 19 5 % in Dec 23) 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 - 22 Jan 2024