Expect Mild Profit Taking Before the FOMC’s Decision and Key US & China Economic Data 

KLCI: 1506.28 (2.2)
DOW: 38109.43 (60.3)
MSCI Asia: 165.07 (-1.5)
FCPO (RM): 4017 (23)
BRENT (USD): 83.55 (1.12)
USDMYR: 4.73 (-0.001)
SGDMYR: 3.5284 (-0.002)
EURMYR: 5.1295 (-0.017)
AUDMYR: 3.1173 (0.004)
GBPMYR: 6.0139 (-0.001)
US: 10-yr yield (%) 4.1373 (0.019)
BNM:10-yr yield (%) 3.8 (0)

Asia/US. Ahead of the US PCE data, most Asian bourses fell after the recent China’s stimulus-driven rebound stalled. Moreover, caution before the upcoming FOMC decision, together with major economic data from the US and China (jobs data, PMI, etc.) this week kept investors on edge. Dow gained 60 pts to 38,109 (+246 pts WoW) amid signs of economic strength signalling that the US economy may avoid a recession coupled with uncompromised rate cut expectations following cooling inflation. On the corporate front, TSLA, VISA and INTC prices dropped on soft guidance while AXP jumped on upbeat results and rosy outlook. Key economic events this week are JOLTS, non-farm payrolls and PMIs while notable earnings reports on tap are MFST, GOOG, AMD, MA, APPL, AMZN, MRK and XOM. 

Malaysia. Tracking higher Dow and regional markets, KLCI extended its gains for a 5th straight day (+2.2 pts to 1,506.3). Market breadth was positive for the 5th consecutive day but ended lower to 1.22 vs 1.92 a day ago, supported by a 13% jump in daily volume to 4.9bn shares valued at RM3.4bn. Foreign investors returned as net buyers (+RM36m, weekly: +RM268m, Jan: +RM634m) whilst local institutions (-RM6m, weekly: -RM166m, Jan: +RM12m) and local retailers (-RM30m, weekly: -RM102m, Jan24: -RM616m) emerged as major net sellers.

Outlook: Mirroring another record close on Dow in light of the US soft landing chorus and cooling inflation, Fed’s expected pivot (March: 47%, May: 88%, June: 100%) coupled with China’s stimulus measures, KLCI should move into recovery mode on positive technicals, eyeing the 1,512-1,528 targets next. Nevertheless, after rallying 51.6 pts or 3.5% YTD and 27.1 pts in the last five consecutive session, KLCI is ripe for potential mild profit taking (resistance: 1,512-1,528, support: 1,475-1,485), ahead of the major US and China economic data coupled with the FOMC meeting outcome this week.   

Source: Hong Leong Investment Bank Research - 29 Jan 2024