FBM KLCI (NEUTRAL)

• The FBM KLCI concluded 2023 with a downturn, closing at 1,454.66, a 2.7% decrease YoY. The decline was largely due toconsistent selling pressure, influenced by the outflow of funds related to U.S. interest rate hikes, rising geopolitical tensions,and political uncertainty ahead of the six state elections in August last year.

• Looking into 2024, from a fundamental perspective, we foresee the FBM KLCI reaching a year-end target of 1,605 points,based on a 15x CY24F earnings multiple, aligning with its post-economic reopening historical PER range of 14x to 16x. Weanticipate the local market to gain momentum, initially supported by public spending beneficiaries in the first half of the year,shifting towards the tech and EMS sectors in the latter half. Consumer spending is expected to initially weaken beforestrengthening in the second half of 2024, as subsidy rationalization is absorbed by the market.

• From a technical front, the FBM KLCI has pulled back from its recent high of 1,470 and displayed a 'Doji' pattern in its weeklychart last Friday, indicating uncertainty about future direction. However, with the index's upward trend still intact and closingabove the 5-week SMA, it may attempt an upward trajectory, potentially retesting its recent high.

• We expect the index to fluctuate between 1,450 and 1,470 this week. A solid break above the previous week's high of 1,470could lead to the key 1,500 level. On the downside, a break below the critical support of 1,447 could see a move towards1,432, aligning with its 38.2% Fibonacci retracement level.

Source: Kenanga Research - 2 Jan 2024