Slippery Road Ahead Amid Economic and Policy Headwinds, and Ongoing Foreign Exodus 

KLCI: 1614.83 (-15)
DOW: 42635.2 (106.8)
MSCI Asia: 180.73 (-1.2)
FCPO (RM): 4329 (-25)
BRENT (USD): 76.16 (-0.89)
SDMYR: 4.5025 (0.015)
SGDMYR: 3.2943 (-0.006)
EURMYR: 4.6464 (-0.034)
AUDMYR: 2.8011 (-0.019)
GBPMYR: 5.606 (-0.032)
US: 10-yr yield (%) 4.6892 (0.004)
BNM:10-yr yield (%) 3.79 (-0.01)

Asia/US. Asian markets mirrored Wall Street’s lead in consolidation as investors assessed rising US bond yields, diminished Fed’s policy easing, and trade war tensions after Washington’s decision this week to blacklist some tech firms from China over alleged military ties. 2.0 overnight. 

The Dow rose 106 pts after falling as much as 201 pts as investors weighed a more watchful FOMC minutes on 2025’s rate-cuts trajectory amid sticky inflation and resilient labour market, as well as news that Trump is considering declaring a national economic emergency to support his proposed tariffs plan. Key focus now shifts to the upcoming release of consumer sentiment and non-farm payrolls (Jan 10) reports, which play an influential role in shaping the FOMC decision on Jan 30. 

Malaysia. In line with the tepid regional markets, KLCI slid 15 pts on extended profit taking after surging 3% in Dec, led by losses in MISC, MAYBANK, PBBANK, SDG, PCHEM and MAXIS. Market breadth was negative for the 5th time in six session at 0.34 vs 0.80 previously. Foreign institutions continued their net outflows for the 5th day (-RM112m, Jan: -RM374m, Dec: -RM2.88bn) while local retailers (+RM46m, Jan: +RM9m, Dec: -RM797m) and local institutions (+RM66m, Jan: +RM365m, Dec: +RM3.68bn) emerged as major net buyers

Outlook In wake of a weak technical readings, we expect KLCI to stay choppy in Jan following a 3% rally in Dec 24 (resistance: 1,630-1,647-1,661) as investors are likely to weigh the implications of Trump 2.0 policies (post Jan 20 inauguration), continued foreign exodus, lingering geopolitical risks, China's economic challenges, as well as major central banks’ policy decisions. However, downside risk may be cushioned near 1,600-1,610 zones, buoyed by: (i) Malaysia’s resilient GDP growth; (ii) robust investment pipeline; and (iii) stable political climate. 

Source: Hong Leong Investment Bank Research - 9 Jan 2025