Skittish Mood Prevails Ahead of Trump’s Inauguration, China’s Economic Woes and RM Weakness 

Technical Pick: MSM

KLCI: 1625.47 (-4)
DOW: 42706.56 (-25.6)
MSCI Asia: 181.33 (0) FCPO (RM): 4339 (1)
BRENT (USD): 76.3 (-0.21) USDMYR: 4.5113 (0.011)
SGDMYR: 3.3006 (0.016) EURMYR: 4.6716 (0.041)
AUDMYR: 2.8172 (0.021) GBPMYR: 5.6274 (0.045)
US: 10-yr yield (%) 4.63 (0.032)
BNM:10-yr yield (%) 3.829 (0.041)

Asia/US. Despite a positive China services PMI, most Asian markets closed lower ahead of key US economic data (ISM services, JOLTS, FOMC minutes, consumer sentiment, and NF payrolls) that could determine the Fed's stance on Jan 30. Sentiment was further weighed down by hawkish remarks from Fed officials, emphasizing that persistent inflation and a strong labour market may keep rates at restrictive levels. 

The S&P (+0.58%) and Nasdaq (+1.25%) rallied while the Dow (-0.06%) lagged, following strong Foxconn earnings and optimistic guidance, along with news that Trump’s upcoming tariff plan would be narrower than expected. 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 influence the FOMC decision on Jan 30. 

Malaysia. Tracking lower regional markets and renewed weakness in RM (vs USD), KLCI eased 4 pts at 1,625.5 to record its 3rd straight loss. Market breadth fell to 0.87 vs 1.32 last Friday, with trading volume shrank 5.9% to 3.48bn shares valued at RM2.66bn. Foreign institutions continued their net outflows for the 3rd consecutive day after an exodus of RM4.21bn in 2024 (-RM56m, Jan: -RM156m, Dec: -RM2.88bn) while local institutions (+RM13m, Jan: +RM155m, Dec: +RM3.68bn) alongside local retailers (+RM43m, Jan: +RM1m, Dec: -RM797m) 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 the upcoming BOJ (Jan 25) and FOMC (Jan 30) decisions. However, downside risk may be cushioned near 1,600-1,623 zones, buoyed by: (i) Malaysia’s resilient GDP growth; (ii) robust investment pipeline; and (iii) a more stable political climate. 

Technically, after sliding 66% from 52W high at RM3.70 (Apr 4) to RM1.23, MSM (consensus FY25E: 10.5x, BVPS: RM2.03) is poised for a long-awaited downtrend reversal following the triple bottom formation. A successful breakout above immediate hurdle of RM1.28 (1M high) could lift share prices to revisit RM1.44 (overhead resistance) and RM1.66 (23.6% FR) levels, while major supports are pegged at RM1.03-1.07-1.13 levels.

Source: Hong Leong Investment Bank Research - 7 Jan 2025