Stuck in downtrend amid Fed’s 2025 rate cut concern, sluggish China data and persistent foreign exodus 

Technical Pick: MEGAFB 

KLCI: 1597.3 (-9.5)
DOW: 43450 (-267)
FCPO (RM): 4724 (-34)
BRENT (USD): 73.19 (-0.72)
USDMYR: 4.4668 (+0.01)
SGDMYR: 3.3070 (+0.01)
EURMYR: 4.6836 (+0.01)
GBPMYR: 5.6678 (+0.04)
US: 10-yr yield (%) 4.40 (+0.0)
BNM:10-yr yield (%) 3.82(+0.0)

Asia/US. Asian markets slipped lower ahead of key central bank decisions this week (Fed on Dec 18, BOJ on Dec 19, and PBOC on Dec 20), as investors weighed recent mixed economic prints from China and the absence of detailed policy measures from Beijing after pleading to increase the country’s budget deficit to 4% of GDP in 2025 in a bid to keep economic growth at around 5% next year. 

The Dow fell for a 9th straight day (-267 pts to 43,450) as investors awaited the 2-day Fed meeting. Traders have factored in a 25-bps cut, but growing concerns that slowing disinflation trends could limit the Fed's scope for further easing in 2025. On the data front, Nov retail sales beat forecast whist the industrial production and capacity utilisation missed expectations.

Malaysia. Given the persistent foreign net outflows and a lack of fresh local catalysts, KLCI tumbled 9.5 pts to 1,597.3, marking its 7th decline in 8 days. Market breadth deteriorated to 0.49 vs 0.65 previously. Foreign institutions emerged as the net sellers for the 20th day (-RM368m, Dec: -RM2.19bn, YTD: -RM3.51bn) whilst local institutions (+RM316m, Dec: +RM2.54bn, YTD: +RM8.81bn) alongside local retailers (+RM52m, Dec: -RM357m, YTD: -RM5.3bn) emerged as major net buyers.

Outlook Ahead of the major central bank decisions this week, KLCI may consolidate further (support: 1,586-1,600 levels) amid persistent foreign net outflows. However, we remain cautiously optimistic of a potential breakout above the downtrend resistance near 1,615, which could propel KLCI towards 1,625-1,640-1,648 levels, buoyed by the potential “window dressing” effect in Dec. Historically, this seasonality has had a 90% success rate over the past 10-20 years, with positive returns ranging from 1.5%-1.8%. 

Technically, after sliding 18.2% from YTD high at RM0.685 (listing date: Nov 11) to a low of RM0.56 (Nov 13), MEGAFB (IPO: RM0.67, FY25F P/E: 14.3x, FY25F DY: 2%) has been steadily trending upward to end at RM0.62 yesterday. A confirmed breakout above immediate neckline resistance at RM0.635 (61.8% FR) could drive price near RM0.685 and RM0.715 (123.6% FR) region. Major supports are pegged at RM0.56, RM0.58 (Nov 25 low) and RM0.595 (lower BB) levels.

VIRTUAL PORTFOLIO We had squared off our Technical Tracker positions on BAUTO (Trading SELL, 22.3% gain), FFB (4.3% loss), SENFONG (2.5% loss) and HEGROUP (4.5% loss) on Dec 17.   

Source: Hong Leong Investment Bank Research - 18 Dec 2024