Oversold Rebound May Continue Towards 1,613-1,625-1,640 Zones

Technical Pick: MHC

KLCI: 1606.96 (11.5)
DOW: 44705.53 (-76.5)
MSCI Asia: 187.63 (2.6)
FCPO (RM): 5150 (75)
BRENT (USD): 73.62 (1.79)
USDMYR: 4.4698 (0.01)
SGDMYR: 3.324 (0.011)
EURMYR: 4.7027 (0.014)
AUDMYR: 2.9033 (0.007)
GBPMYR: 5.6663 (0.001)
US: 10-yr yield (%) 4.2245 (0.035)
BNM:10-yr yield (%) 3.757 (0.002)

Asia/US. Asian markets ended broadly higher, taking cues from a rally in the US major technology stocks and dovish remark by Christopher Waller, ahead of a barrage of jobs data and remarks from Fed speakers that will help shape the outlook for interest rates. Sentiment was also boosted by expectations that China will start the key annual economic work conference next Wed to map out growth targets and stimulus plans to boost a sluggish economy and heightened US-China tensions under Trump 2.0. Wall St ended mixed after a relentless rally, with the Nasdaq (+0.4% to 19,479 and S&P 500 (+0.05% to 6,050) closed at record highs while Dow lost 77 pts at 44,705. On economic data, investors digested a strong October JOLTS data, ahead of the key Powell speech (Dec 4) and NF payrolls (Dec 6).

Malaysia. In line with higher regional bourses, KLCI staged a long-awaited oversold rebound (+11.5 pts to 1.607), led by bargain hunting on YTL, YTLPOWR, MAYBANK, PETDAG, SDG and PBBANK. Market breadth was bullish at 1.58 vs 0.91 previously, supported by 3.32bn shares valued at RM3.31bn. Foreign institutions emerged as the major net sellers for the 10th consecutive day (-RM219m, Dec: -RM468m, YTD: -RM1.79bn) alongside local retailers (-RM65m, Dec: -RM62m, YTD: -RM5.0bn) while local institutions (+RM530m, Dec: +RM530m, YTD: +RM6.79bn) were the major net buyers.

Outlook As technical readings are on the mend, we may anticipate a technical rebound in Dec (resistance: 1,613-1,625-1,640; support: 1,581-1,586-1,600) amid a grossly oversold position (-77 pts from 52-week high 1,684), as well as the “window dressing” effect, which has had a 90% hit rate for the past 10/20 years with positive returns of 1.5%/1.8%. However, we see formidable barriers at 1,650-1,660 zones given the persistent exodus by foreign investors, geopolitical tensions, Fed’s rate-cuts uncertainty, China’s weak growth, and Trump 2.0’s MAGA policy.

Technically, MHC’s (CP: RM1.03, trailing P/E: 5.3x, P/BV: 0.61x, netcash/shr: RM0.48) uptrend remains intact barring a fall below RM0.98-1.00 supports. Any weakness should attract bargain hunters looking for rebound towards RM1.06 (upper BB). A successful breakout will spur more upside towards RM1.11 (123.6% FR), RM1.15 (150% FR) and RM1.17 (161.8% FR) levels.

Source: Hong Leong Investment Bank Research - 4 Dec 2024