Concerns over Trump’s policies, key central bank meetings and ongoing foreign exodus pose challenges to a sustainable rebound

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. Ahead of Trump’s inauguration on Jan 20, Asian markets ended mixed as investors weighed better-than-expected economic data from China (i.e.4Q GDP, Dec industrial and retail sales) and potential rate hike by the BOJ on 24 Jan. The Dow rallied 334 pts to 43,487 as investors cheered the benign US core inflation and PPI readings, coupled with a strong start for the 4Q24 results season particularly from the banks. Sentiment was also buoyed by news that Trump had a ‘good’ call with China’s Xi about TikTok and trade. This week, attention turns to Trump's inauguration and a busy earnings season with reports from NFLX, PG, JNJ, GE, TXN, AXP and VZ, while key economic data include S&P Global PMIs and existing home sales.

Malaysia. After plunging almost 87 pts in the last 11 days YTD, KLCI staged a long-awaited oversold rebound (+11.2 pts to 1,566.7) as values re-emerged following the recent rout, mainly driven by the fallout from US AI-chip export curbs affecting local DC projects and ongoing foreign outflows. Market breadth turned positive at 1.27 after nine consecutive day of negative readings. Foreign institutions continued their net outflows for the 12th session (-RM214m, week: -RM1.33bn, Jan: -RM1.93bn) while local retailers (+RM110m, week: +RM531m, Jan: +RM709m) alongside local institutions (+RM103m, week: +RM797m, Jan: +RM1.22bn) emerged as major net buyers.

Technical view From a 3M high of 1,644.5 (Dec 31), KLCI extended its consolidation to a low at 1,545.7 before staging a relief rally to 1,566.7 last Friday. Following the piercing pattern, KLCI may see a potential downtrend reversal, targeting 1,589 (61.8% FR), 1,600 and 1,612 (200D MA) levels. On the downside, a decisive breakdown below 1,545-1,550 may push the benchmark towards 1,529 (Aug 5 low) and 1,500 levels.

Outlook The technical rebound last Friday may continue this week towards 1,589-1,600 (support: 1,529-1,550) zones amid bottoming up technical readings. However, further gains could be capped at 1,612, as investors recalibrate: (i) Trump 2.0 policies; (ii) China’s economic challenges; (iii) persistent foreign exodus, and (iv) upcoming major central banks’ policy decisions, notably from the BOJ (Jan 24), ECB and FOMC (Jan 30).

Source: Hong Leong Investment Bank Research - 20 Jan 2025