Will KLCI extend its winning streak in March? 

KLCI: 1551.4 (5.8)
DOW: 38994 (45)
FCPO (RM): 3970 (63)
BRENT (USD): 83.6 (-0.06)
USDMYR: 4.743 (-0.03)
SGDMYR: 3.528 (-0.01)
EURMYR: 5.146 (-0.01)
AUDMYR: 3.084 (-0.01)
GBPMYR: 6.007 (-0.02)
US: 10-yr yield (%) 4.25 (-0.01)
BNM:10-yr yield (%) 3.86 (-0.02)

Asia/US. Most Asian markets ended mixed as investors awaited the Fed’s preferred gauged of US PCE data to determine future policy decisions. However, the SHCOMP rallied 1.9% amid growing optimism that Beijing’s current market-friendly policies would bode well for the financial markets, as well as look forward to the NPC next week for more insights on economic targets and policy priorities for the year. The Dow ticked up 45 pts to wrap up the month 844 pts higher at 38,994, while the Nasdaq soared 0.9% to end at an all-time high of 16,092. Investors were digesting the core PCE data, which aligned with forecasts, and the rising weekly jobless claims reports, providing a sigh of relief for bullish sentiment.

Malaysia. KLCI edged up 5.9 pts to 1,551.4 amid the MSCI rebalancing exercise, extending its winning streak for the 4th consecutive month in Feb (+2.5%). However, market breadth remained negative for a 5th straight session at 0.54 vs 0.40 a day ago while daily traded value surged to RM7bn, significantly higher against Feb’s ADTV RM2.7bn. On fund flows, foreign investors net sold RM162m (Feb: +RM1.3bn, YTD: +RM2.0bn) whilst local institutions (+RM161m, Feb: -RM969m, YTD: -RM981m) and local retailers (+RM1m, Feb: -RM354m, YTD: -RM1.02bn) emerged as net buyers. 

Outlook After recording a 4th consecutive monthly gain in Feb, will KLCI continue its winning streak in March? Technically, barring a decisive fall below 1,520-1,533 supports, the odds would still favour the bulls to resume its ascent in March. To recap, it is worth noting that historically, the KLCI has performed poorly in March, with average declines of 3.3% and 0.8% over the past 5 and 10 years, respectively. Nevertheless, with many negative news already being priced in, we remain constructive on equities, aided by continued net inflows by foreign investors (YTD: +RM2bn vs -RM2.6bn in 2023) amid the weak Ringgit, Fed’s expected pivot, KLCI’s undemanding valuation, coupled with steady economic growth and improving domestic politics. Major supports for KLCI in March are situated near 1,500-1,520-1,533 while formidable hurdles are pegged at 1,572-1,580-1,600 levels.

Source: Hong Leong Investment Bank Research - 1 Mar 2024