Extended Downtrend Amid Persistent Foreign Exodus and a Hawkish Fed 

Technical Pick: METRO 

KLCI: 1599.6 (2.3)
DOW: 42327 (-1123)
FCPO (RM): 4530 (-194)
BRENT (USD): 72.9 (-0.29)
USDMYR: 4.4698 (+0.00)
SGDMYR: 3.3069 (-0.00)
EURMYR: 4.6908 (+0.01)
GBPMYR: 5.6711 (+0.00)
US: 10-yr yield (%) 4.52 (+0.12)
BNM:10-yr yield (%) 3.81(-0.01)

Asia/US. Asian markets fluctuated ahead of key central bank decisions this week (Fed on Dec 18, BOJ on Dec 19, and PBOC on Dec 20). Investors are awaiting more policy easing from PBOC and fiscal stimulus details from China after Beijing pledged 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 sank 1,123 pts at 42,327, booking its 10th consecutive decline (its longest losing streak since 1974) as the Fed's widely anticipated 25 bps cut to 4.25%-4.5% was overshadowed by its forecast of just two rate cuts in 2025 (previously four) in anticipation of sticky inflation and a strong US economy. Correspondingly, DXY jumped 1.2% to 108.25 and the US10Y yield rallied 12 bps to 4.52%, while the odds for a pause in rate cuts on Jan 29 meeting rose to 93% against 80% before the FOMC decision.

Malaysia. KLCI inched up 2.3 pts to 1,599.6 after locking in a tight range band within 1,594.8-1,602.4 ahead of the crucial Fed decision. Market breadth was negative at 0.96, improved from 0.49 previously while trading volume was thin at 2.55bn shares valued at RM2.29bn. Foreign institutions emerged as the net sellers for the 21st day (-RM150m, Dec: -RM2.34bn, YTD: -RM3.66bn) whilst local institutions (+RM182m, Dec: +RM2.73bn, YTD: +RM8.99bn) alongside local retailers (+RM32m, Dec: -RM389m, YTD: -RM5.33bn) emerged as major net buyers.

Outlook Tracking the bearish Wall St amid hawkish Fed and surging yield, KLCI may consolidate further amid persistent foreign net outflows and renewed RM (vs USD) weakness. However, downside risks may be cushioned near 1,575-1,586 support zones, buoyed by: (i) potential “window dressing” effect in Dec; (ii) Malaysia’s resilient GDP growth; (iii) subsidy reforms in motion; (iv) robust investment pipeline; and (v) a more stable political climate.

Technically, after sliding 27.3% from YTD high at RM0.275 (listing date: Nov 15) to a low of RM0.20 (Dec 16), METRO (IPO: RM0.25, FY25F P/E: 22x) has staged a mild rebound to end at RM0.22 yesterday, a tad above 10D MA (RM0.21). A confirmed breakout above immediate neckline resistance at RM0.235 (50% FR) could propel the price near RM0.25, RM0.275 and RM0.29 (123.6% FR) region. Major supports are pegged at RM0.19-0.20-0.21 levels. 

Source: Hong Leong Investment Bank Research - 19 Dec 2024