Risk-on Mode to Prevail for KLCI to Revisit 1,504-1,502 After Holding Well Above 20D MA 

KLCI: 1491.19 (4.8)
DOW: 38001.81 (138)
MSCI Asia: 164.08 (0.3)
FCPO (RM): 3941 (37)
BRENT (USD): 80.06 (1.5)
USDMYR: 4.7308 (0.012)
SGDMYR: 3.5275 (0.008)
EURMYR: 5.1551 (0.02)
AUDMYR: 3.1164 (0.003)
GBPMYR: 6.0102 (0.026)
US: 10-yr yield (%) 4.1052 (-0.017)
BNM:10-yr yield (%) 3.8 (-0.03)

Asia/US. Asian markets ended mostly higher, taking cues from rallies on Wall St (boosted by hopes of the AI boom, lower year-ahead inflation expectations and resilient economic data) and Nikkei-225 (amid tepid inflation and dovish BOJ bets). However, the gains were capped due to pessimism on China’s economy and uncertainty of aggressive stimulus measures from Beijing to revive its shaky economy. Dow notched its 3rd straight gain (+138 pts to a fresh record high 38,001), boosted by the bullish bets on mega techs ahead of a busy week of corporate earnings and key economic data. Key macro data in focus this week includes the advance 4Q23 GDP estimate, PCE Price Indexes, and personal income and spending while major earnings results on tap are Microsoft, Tesla, Visa, J&J, P&G, Netflix, Intel, Verizon, 3M and IBM.

Malaysia. Tracking the record high Dow and higher regional markets, KLCI rose 4.8 pts to 1,491.2. Market breadth was positive for a 2nd session (1.72 vs 1.78 a day ago), thanks to the bargain-hunting activities on fundamentally and institutionally appealing counters after the domino effect triggered by the meltdown in perceived ‘warehoused’ stocks dominated by small caps and ACE companies. Foreign investors (+RM128m, Jan: +RM494m) emerged as key net buyers for a 2nd day whilst local institutions (-RM77m, Jan: +RM101m) and local investors (-RM51m, Jan24: -RM595m) emerged as key net sellers. 

Outlook. In wake of the lingering geopolitical tensions in Middle East, disappointment in rolling out mega stimulus measures from China and speculations of the Fed’s pivot timeline, KLCI may continue to remain wary (supports: 1,463-1,477; resistance: 1,504-1,512 zones), as the recent domino effect in perceived warehoused stocks’ meltdown may continue for a while (albeit on a smaller scale). Nevertheless, downside is likely to be well-cushioned and any selldown will create bargain hunting opportunities amid favourable domestic leads (i.e. NETR, NIMP2023, reinvigoration of developments in Johor, rising FDI momentum, the return of foreign investors), and rising risk appetite for the under owned Bursa Malaysia amid Fed’s expected pivot and undemanding KLCI’s CY 2024 P/E at 13.4x (vs 10Y mean 17.2x).

VIRTUAL PORTFOLIO  After hitting our long-term target at RM1.50, we had squared off our position on OSK (14.5% gain) yesterday.   

Source: Hong Leong Investment Bank Research - 23 Jan 2024

Traders Brief - HLIB Retail Research –23 Jan