Volatility Ahead Amid Trump’s Policies, China’s Economic Woes and Renewed RM Weakness 

Technical Pick: SENFONG

KLCI: 1629.46 (-3.4)
DOW: 42732.13 (339.9)
MSCI Asia: 181.37 (0.3)
FCPO (RM): 4368 (35)
BRENT (USD): 76.51 (0.58)
USDMYR: 4.5002 (0.022)
SGDMYR: 3.2847 (-0.003)
EURMYR: 4.6309 (-0.005)
AUDMYR: 2.7962 (0.012)
GBPMYR: 5.5827 (-0.007)
US: 10-yr yield (%) 4.5975 (0.039)
BNM:10-yr yield (%) 3.788 (0.042)

Asia/US. Asian markets ended mixed, led by an extended fall on SHCOMP (-1.57% to 3,211) and CNY’s rout (vs USD) amid looming threats of higher tariffs from the Trump 2.0 administration, despite news that the PBOC may cut interest rates at an appropriate time and the government will expand issuance of ultra-long bonds and ramp up efforts to boost consumption. 

After sliding 923 pts in four straight days, the Dow rebounded 339 pts to 42,731, fuelled by a technical rebound in mega cap and AI-related stocks amid positive Dec ISM manufacturing data, coupled with looser regulatory and pro-growth policies anticipated from the Trump 2.0 administration. This week’s key economic data include ISM services (Jan 7), JOLTS (Jan 7), FOMC minutes (Jan 9), consumer sentiment and NF payrolls (Jan 10), which will provide insights into the economy’s trajectory and the upcoming FOMC decision on Jan 30. 

Malaysia. Tracking the mixed regional markets, renewed weakness in RM (vs USD) and a tepid Malaysia’s Dec manufacturing PMI, KLCI fell 3.4 pts at 1,629.5 after rallying 3% in Dec. However, market breadth improved to 1.32 vs 0.54 a day ago, boosted by a 40% surge in trading volume to 3.7bn shares valued at RM2.87bn as trading interest shifted to small-caps and lower liners. Foreign institutions continued their net outflows on the 2nd trading day of 2025 after an exodus of RM4.21bn in 2024 (-RM44m, Jan: -RM100m, Dec: -RM2.88bn) alongside local retailers (-RM43m, Jan: -RM42m, Dec: -RM797m) while local institutions (+RM87m, Jan: +RM142m, Dec: +RM3.68bn) emerged as major net buyers.

Outlook We expect KLCI to stay choppy in Jan following a 3% rally in Dec 24 (resistance: 1,647-1,661) as investors weigh Trump 2.0 policies (post Jan 20 inauguration), lingering geopolitical risks, China's economic woes and sliding CNY, and upcoming BOJ (Jan 25) and FOMC (Jan 30) decisions. However, downside risk may be cushioned near 1,600-1,623 zones, buoyed by: (i) the signing of JSSEZ agreement today; (ii) Malaysia’s resilient GDP growth and robust investment pipeline; and (iii) a more stable political climate. 

Technically, SENFONG (NR, FV: RM1.51, FY6/25: 10.1x) is poised for a long-awaited breakout above immediate hurdle above RM1.00 psychological level, before advancing towards critical downtrend resistance at RM1.10. A convincing breakout above it could enhance upward momentum near RM1.15 (61.8% FR) and RM1.23 (76.4% FR) levels, while the RM0.92 (50W MA) and RM0.94 (Dec 19 low) supports limit downside risk.

Source: Hong Leong Investment Bank Research - 6 Jan 2025