Lukewarm Sentiment to Extend

KLCI: 1512.28 (-0.1)
DOW: 38797.38 (125.7)
MSCI Asia: 167.23 (-0.2)
FCPO (RM): 3884 (10)
BRENT (USD): 82 (-0.19)
USDMYR: 4.765 (-0.008)
SGDMYR: 3.5387 (-0.01)
EURMYR: 5.1307 (-0.016)
AUDMYR: 3.1041 (0.003)
GBPMYR: 6.0094 (-0.019)
US: 10-yr yield (%) 4.1793 (0.004)
BNM:10-yr yield (%) 3.813 (-0.028)

Asia/US. Due to the Lunar Festival, the stock markets in China, Taiwan, Singapore, and Malaysia were closed, while the rest of the Asian market mostly ended on a positive note. The positive trajectory was fueled by the strong performance in the US market the previous week. Investor sentiment was further bolstered by the S&P500 achieving its first-ever weekly close above the 5000 mark. Overnight, the Dow achieved a new record close at 38,797 (+125pts or +0.33%), while NASDAQ slipped by 48 points or 0.30% to 15,942. Investors are awaiting the release of US January CPI data slated tomorrow, as it is believed to hold significant influence over the Federal Reserve's upcoming monetary decisions. However, Federal Reserve officials continued to signal that early rate cuts aren't on the table, with Federal Reserve Governor Michelle Bowman saying she doesn't expect the Fed to cut rates "in the immediate future".

Malaysia. Amidst the absence of new catalyst and a subdued trading atmosphere preceding the CNY holidays, KLCI ended -0.08 pts lower at 1512.8. This underscored by a 45% decline in the ADV at RM1.09bn compared to the previous trading day’s RM2.0bn, marking the lowest level in 2024. Foreign investors (+RM+73m, YTD: +RM1.16bn) continued its net inflows for the 7th straight session while local institutions (-RM57m, YTD: -RM406m) and local investors (-RM16m, YTD: -RM761m) were the major net sellers.

Outlook: The lukewarm trading sentiment is anticipated to persist into the first week of Lunar New Year, with the KLCI projected to remain within the 1,500-1,510 support range. Investor sentiment may also remain cautious due to ongoing concerns about the Federal Reserve's stance on monetary policy, uncertainties surrounding the sustainability of China's stock market recovery, and expectations of a flurry of local corporate results post-CNY. Nonethless, we are hopeful for a reprieve in KLCI towards 1512-1528 levels should these concerns subside, fueled by (i) increased risk appetite by foreigners for the under owned Bursa Malaysia (with foreign shareholding at all-time low of 19.5% in Dec 2023); (ii) improved earnings outlook for KLCI components (CY23:- 0.3%, CY24: +8.2%); and (iii) soft landing narrative in the US amid decelerating inflation (S&P 500 CY2024/2025: 11%/9%, Factset).  

Source: Hong Leong Investment Bank Research - 13 Feb 2024