Oversold Rebound Is Capped by Persistent Foreign Exodus 

KLCI: 1555.54 (-6.6)
DOW: 43153.13 (-68.4)
MSCI Asia: 179.07 (1.8)
FCPO (RM): 4108 (-78)
BRENT (USD): 81.29 (-0.74)
USDMYR: 4.5028 (0.004)
SGDMYR: 3.2932 (0.001)
EURMYR: 4.6318 (-0.007)
AUDMYR: 2.798 (0.006)
GBPMYR: 5.4926 (-0.005)
US: 10-yr yield (%) 4.6125 (-0.041)
BNM:10-yr yield (%) 3.794 (-0.003)

Asia/US. Tracking overnight rally on Wall St, Asian markets ended higher as investors cheered a benign US core inflation data and awaited more concrete policy measures from Beijing to boost its sluggish economy. After rallying 1,283 in three straight session, the Dow lost 68 pts at 43,153 on profit taking, mainly led by a 4% slide on AAPL due to weak sales in China, despite upbeat earnings from MS and BAC. Meanwhile, the US10Y bond yield fell 4 bps to 4.61% as investors reacted to weaker-than-expected retail sales, rising weekly jobless claims, and dovish remarks from Federal Reserve Governor Christopher Waller, who suggested the possibility of rate cuts if inflation continues to ease. 

Malaysia. Bucking the positive regional markets, KLCI extended its downtrend (-6.6 pts to 1,555.5) for the 4th consecutive day after soaring as much as 14.5 pts intraday, as investors continued to assess the repercussions of US AI-chip export curbs on local DC projects and persistent foreign exodus. Foreign institutions continued their net outflows for the 11th day (-RM213m, Jan: -RM1.71bn, Dec: -RM2.88bn) while local retailers (+RM110m, Jan: +RM635m, Dec: -RM797m) alongside local institutions (+RM103m, Jan: +RM1.08bn, Dec: +RM3.68bn) emerged as major net buyers.

Technical view From a 3M high of 1,644.5 (Dec 31), KLCI extended its consolidation to end at 1,555.5 yesterday, its lowest close since intraday low of 1,529.1 on Aug 5. With the KLCI firmly in a downtrend channel, a deeper consolidation is expected within 1,529-1,550 (downtrend channel) zones, before staging a potential rebound. On the upside, key barriers are pegged at 1,589 (61.8% FR), 1,600 and 1,612 (200D MA) levels. 

Outlook After sliding 87 pts in Jan MTD, KLCI is ripe for a technical rebound amid grossly oversold technical readings. However, any potential rebound (resistance: 1,589-1,600-1,612) may be capped by persistent foreign exodus and investors’ concerns over US AI chip restrictions on the expected growth in domestic power demand. Overall, volatility persists (support: 1,529-1,550) as investors continue to weigh: (i) the implications of Trump 2.0 policies; (ii) China’s economic challenges; as well as (iii) upcoming major central banks’ policy decisions, notably from the BOJ (Jan 25), ECB and FOMC (Jan 30). 

Source: Hong Leong Investment Bank Research - 17 Jan 2025