To Refresh 52-week High of 1,504 Levels?

KLCI: 1496.1 (4.9)
DOW: 37906 (-95)
FCPO (RM): 3948 (44)
BRENT (USD): 79.6 (-0.5)
USDMYR: 4.7277 (-0.00)
SGDMYR: 3.529 (0.00)
EURMYR: 5.147(-0.01)
AUDMYR: 3.114 (-0.00)
GBPMYR: 6.018 (0.01)
US: 10-yr yield (%) 4.13 (0.02)
BNM:10-yr yield (%) 3.81 (0.01)

Asia/US. Tracking another fresh record high from the Dow, most Asian bourses ended higher after the BOJ retained its ultra-dovish stance and forecast cooling inflation. Sentiment was also supported by news that Beijing may consider setting up a stock market stabilization fund (up to 2 trillion yuan) to stem stock market routs. Dow lost 96 pts to 37,905, snapping a 3-day winning streak after closing at fresh record high, as investors digested multiple blue-chip companies spanning various industries and awaited key macro data this week (i.e. advance 4Q23 GDP estimate, PCE Price Indexes, and personal income and spending). NFLX, VZ, PG and UAL prices gained on upbeat earnings and outlook whilst DHI, 3M and JNJ slipped as results disappointed. 

Malaysia. In line with higher Dow and regional markets, KLCI extended its gains for a 3rd consecutive session (+4.9 pts to 1,496.1), thanks to the persistent bargain-hunting activities on selected blue chips after the recent domino effect triggered by the meltdown in perceived ‘warehoused’ stocks dominated by small caps and ACE companies. Foreign investors turned net sellers (-RM66m, Jan: +RM428m) whilst local institutions (+RM21m, Jan: +RM122m) and local investors (+RM45m, Jan24: -RM550m) emerged as major net buyers. 

Outlook. In light of the lingering geopolitical tensions in the Middle East and awaiting the timing of Beijing implementing further concrete policies to stimulate its economy and stock market, along with Wall Street’s assessment of the US results season and Fed's rate cuts timeline, KLCI may maintain a sideways trajectory (support: 1,464-1,478, resistance: 1,504-1,512 zones). 

Although the recent domino effect in perceived warehoused stocks’ meltdown may continue, downside is likely to be well-cushioned by (i) regulators’ assurance that Bursa Malaysia fundamentals remain strong as the affected stocks’ constituted less than 0.5% of the total market capitalisation, (ii) favourable domestic leads (i.e. NETR, NIMP2023, reinvigoration of developments in Johor, rising FDI momentum, the return of foreign investors), and (iii) rising risk appetite for the under owned Bursa Malaysia (with foreign shareholding hovered at all-time low of 19.5% in Dec 2023) 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 - 24 Jan 2024