Will KLCI’s uptrend resume as RM recovers and foreign selling tapers off?

KLCI: 1539.86 (4)

DOW: 38722.69 (-68.7)

MSCI Asia: 177.78 (1.8)

FCPO (RM): 4094 (23)

BRENT (USD): 82.08 (-0.88)

USDMYR: 4.6835 (-0.022)

SGDMYR: 3.5184 (-0.004)

EURMYR: 5.1217 (-0.008)

AUDMYR: 3.112 (0.008)

GBPMYR: 6.0078 (0.008)

US: 10-yr yield (%) 4.0749 (-0.008)

BNM:10-yr yield (%) 3.843 (-0.004)

Asia/US. MSCI All Countries Asia Pacific index rose 1.8 pts to 177.78 (+3.7 pts WoW), as sentiment was buoyed by (i) Powell’s testimony to the Congress that hinted Fed rate cuts may not be too distant if inflation signals support policy easing, and (ii) positive remarks from the PBOC’s governor that China possesses a rich monetary toolbox to achieve a 5% GDP target for 2024. The Dow lost 69 pts to 38,722 (-365pts Wow) as investors parsed a mixed labour market report and profit taking consolidations amongst the mega-caps. Despite a notable hike in the Feb's nonfarm payrolls (from a downwardly revised Jan figure), the unemployment rate unexpectedly rose alongside with slower wage growth, reinforcing hopes that rate cuts could come as early as 12 June FOMC meeting. Key upcoming events before the Mar 20 FOMC meeting are inflation data (12 Mar), retail sales (14 Mar), consumer sentiment index (15 Mar) and housing starts (19 Mar).

Malaysia. Lifted by bargain hunting activities on selected banking, utility, telco and plantation heavyweights, coupled with a recovery in RM (vs USD) to RM4.70 (from 26Y low of RM4.80), KLCI gained 4 pts to end at 1,539.9 (+1.8 pts WoW). Foreign investors were the major net sellers for a 8th straight day (-RM78m, Mar: -RM1.72bn, YTD: +RM289m) followed by the local retailers (-RM5m, Mar: +RM150m, YTD: -RM871m) while local institutions (+RM83m, Mar: +RM1.56bn, YTD: +RM581m) emerged as the major net buyers.

Outlook In wake of a recovery in RM (vs USD), a less-hawkish stance from Powell coupled with expectations of a reduced foreign selling (after net sold RM2.14bn in the last 8 consecutive day), KLCI may attempt to revisit the 1,550-1,559 levels this week, barring a decisive breakdown below 1,508-1,518-1,525 supports. However, we reckon that the market is likely to stay choppy ahead, as historical trend suggested the KLCI has seen average declines of 3.3% and 0.8% over the past 5 and 10 years, respectively.

Source: Hong Leong Investment Bank Research - 11 Mar 2024