Building a base near 1,518-1,532 as market fret over global inflation and rates outlook

KLCI: 1544.71 (4.9)
DOW: 38769.66 (47)
MSCI Asia: 176.26 (-1.5)
FCPO (RM): 4138 (7)
BRENT (USD): 82.21 (0.13)
USDMYR: 4.6818 (-0.002)
SGDMYR: 3.5208 (0.002)
EURMYR: 5.1193 (-0.002)
AUDMYR: 3.0986 (-0.013)
GBPMYR: 6.0126 (0.005)
US: 10-yr yield (%) 4.0982 (0.023)
BNM:10-yr yield (%) 3.826 (-0.017)

Asia/US. Led by a 2.2% slump on Nikkei 225 and the global inflation and interest rate outlook uncertainty, Asian markets ended lower amid speculations that the BOJ may end its ultra-loose policy and stimulus measures during its BOJ policy meeting on 19 Mar as Japan averted a technical recession. Sentiment was also dampened by persistent deflationary pressure in China as Feb PPI slipped for a 17th consecutive month despite a rise in China Feb’s CPI on CNY seasonality. The Dow tumbled as much as 239 pts before staging a turnaround to close +47 pts to 38,769 as investors braced for the key inflation (12 Mar) and PPI data (14 Mar) for clues whether the disinflationary trend will continue or hit a roadblock. Last Friday, non-farm payrolls rose from a downwardly revised Jan figure but the unemployment rate unexpectedly rose alongside with slower wage growth, reinforcing hopes that rate cuts could come as early as 12 June FOMC meeting.

Malaysia. Encouraged by the Powell’s congressional testimony that Fed rates will likely be reduced this year if inflation slows further, KLCI continued its mild recovery for a 3rd session (+4.9 pts to 1,544.7), led by bargain hunting activities on CDB, MAYBANK, PMETAL, PCHEM, GENTING and IHH. Local institutions were the major net buyers for a 9th straight day (+RM127m, Mar: +RM1.69bn, YTD: +RM708m), absorbing the selling spree by foreigners (-RM92m, Mar: -RM1.8bn, YTD: +RM197m) and local retailers (-RM35m, Mar: +RM115m, YTD: -RM906m). 

Outlook. In wake of a stabilised RM (vs USD), a less-hawkish stance from Powell coupled with expectations of a reduced foreign selling (after net sold RM2.2bn in the last 9 consecutive day), KLCI may attempt to revisit the YTD high of 1,559 levels this week, barring a decisive breakdown below 1,518-1,532 supports. However, we reckon that the market is likely to stay choppy ahead, as investors fret over global inflation and rates outlook.

Source: Hong Leong Investment Bank Research - 12 Mar 2024