Potential Window Dressing May Boost KLCI to End Above 1,600 Despite External Headwinds 

Technical Pick: FOCUSP

KLCI: 1600.6 (1.0)
DOW: 42342 (15)
FCPO (RM): 4512 (-18)
BRENT (USD): 72.68 (-0.71)
USDMYR: 4.5055 (0.04)
SGDMYR: 3.3152 (0.01)
EURMYR: 4.6914 (0.00)
GBPMYR: 5.7050 (0.03)
US: 10-yr yield (%) 4.56 (0.05)
BNM:10-yr yield (%) 3.83 (0.02)

Asia/US. Tracking US markets riot, Asian markets ended lower after the Fed flagged a slower pace of rate cuts in 2025. Meanwhile, the BOJ left its policy rate unchanged at 0.25%, signalling more caution over Japan's economic outlook and the path of inflation. Traders are expecting the BOJ could hold off on a rate hike again in Jan, citing limited time to assess wage trends and potential impacts from Trump 2.0 policies.

The Dow staged a 460-pt relief rally in early trading before paring gains to 15 pts at 42,342, as investors weighed the upbeat revised 3Q24 GDP of 3.1% (vs 2.8% previously) alongside a hawkish Fed’s pivot for 2025. Correspondingly, the US10Y yield soared 5 bps to 4.56%, with the odds for a rate-cut pause on Jan 29 meeting stayed at 93% against 77% a week ago.

Malaysia. KLCI gained 1-pt to 1,600.6, recovering from an 8.8-pt selloff amid a hawkish Fed stance and a 0.79% drop in RM (vs USD). Market breadth was negative at 0.53 vs 0.49 previously, while trading volume increased 25% to 3.20bn shares valued at RM3.03bn. Foreign institutions emerged as the net sellers for the 22nd day (-RM135m, Dec: -RM2.47bn, YTD: -RM3.79bn) alongside local retailers (-RM30m, Dec: -RM419m, YTD: -RM5.36bn) whilst local institutions (+RM165m, Dec: +RM2.89bn, YTD: +RM9.15bn) emerged as major net buyers.

Outlook Mirroring the negative trend on Wall St amid hawkish Fed and surging yields, KLCI may experience choppy waters in the near term amid persistent foreign net outflows and renewed pressure on RM (vs USD). 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, FOCUSP (BUY, TP: RM1.14, FY25F P/E: 9.2x, FY25F DY: 5.1%) is primed for a long-awaited breakout, having recently rebounded from a 19.4% slide from its YTD high of RM0.875 (Jul 18) to a low of RM0.685 (Aug 6). The stock has formed a series of higher lows, closing at RM0.805 yesterday, setting the stage for a potential long-term triangle breakout. A confirmed crossing above downtrend resistance near RM0.83 (50% FR) could spur further upside towards RM0.875, RM0.92 (61.8% FR) and RM0.98 (76.4% FR) region. Major supports are pegged at RM0.78 (200D MA) and RM0.76 (Nov 15 low) levels. 

Source: Hong Leong Investment Bank Research - 20 Dec 2024