Broader market turns edgy due to profit taking amid the ongoing Feb results season 

KLCI: 1538.61 (5.1)
DOW: 38627.99 (-145.1, Feb 16 )
MSCI Asia: 171.1 (0.2)
FCPO (RM): 3886 (21)
BRENT (USD): 83.56 (0.09)
USDMYR: 4.787 (0.008)
SGDMYR: 3.5571 (0.007)
EURMYR: 5.1578 (0.013)
AUDMYR: 3.1307 (0.013)
GBPMYR: 6.0385 (0.024)
US: 10-yr yield (%) 4.2792 (0)
BNM:10-yr yield (%) 3.863 (0.019)

Asia/US. Asian markets ended mostly higher, lifted by a 1.56% rally on the SHCOMP (reopened after a week-long holiday) amid buoyant travel and spending data during the week-long Lunar New Year holidays, overshadowed the US red-hot inflation data that could heighten fears of an extended restrictive Fed rates. Wall St was closed for the President’s Day holiday. The Dow ended -44 pts lower to 38,628, mainly driven by a string of better-than-expected economic data and hawkish comments by policy makers drove traders to roll back aggressive bets on rate cuts. This week, investors will closely monitor notable earnings from HD, NVDA and WMT, as well as key economic data including Jan FOMC minutes, Fed official speeches, and the Feb S&P Global PMIs for both the manufacturing and services sectors. 

Malaysia. Tracking higher SHCOMP and foreign net inflows, KLCI rose 5.1 pts at 1538.6 (+84 pts YTD), led by selected buying interests on MRDIY, PETDAG, PBBANK, MAYBANK and PETGAS. Despite gains, market breadth was negative at 0.81 vs 1.23 last Friday due to profit taking amid the ongoing Feb results season. Foreign investors (+RM61m, YTD: +RM1.58bn) were the major net buyers followed by local retail investors (+RM1m, YTD: -RM836m) while the local institutions (-RM62m, YTD: -RM746m) were the sole net sellers.

Outlook In the near term, KLCI is expected to remain choppy (support: 1,500-1,520) as investors weigh (i) ongoing Feb reporting season; (ii) a delayed in Fed’s rate-cuts trajectory and (iii) the sustainability of recent SHCOMP’s rebound. However, we remain hopeful for a reprieve in the KLCI in the long term (resistance: 1,550-1,5721,600), fuelled by (i) stabilising domestic politics and increased risk appetite by foreigners for the under-owned Bursa Malaysia (with foreign shareholding ticked up by 0.1% to 19.6% in Jan and net inflows of RM1.6bn YTD); (ii) brighter earnings outlook for KLCI components (CY23:- 0.3%, CY24: +8.2%); (iii) US soft landing narrative; and (iv) China’s indications of strong measures to revitalise its slowing economy will spur positive spillover effects on key trading nations like Malaysia.

Source: Hong Leong Investment Bank Research - 20 Feb 2024