KLCI to waver ahead of the FOMC meeting on 20 Mar amid persistent foreign outflows and elevated US inflation

KLCI: 1543.75 (5.6)
DOW: 38905.66 (-137.7)
MSCI Asia: 176.38 (0.1)
FCPO (RM): 4303 (8)
BRENT (USD): 85.42 (1.39)
USDMYR: 4.686 (0)
SGDMYR: 3.5179 (0.003)
EURMYR: 5.127 (0.007)
AUDMYR: 3.1042 (0.007)
GBPMYR: 6.0053 (0.017)
US: 10-yr yield (%) 4.2903 (0.1)
BNM:10-yr yield (%) 3.847 (0.004)

Asia/US. Most Asian markets stuck to a tight range in anticipation of more cues on US PPI and retail sales data, as well as persistent jitters over the BOJ that the central bank could tighten its monetary policy as early as 19 Mar policy meeting. Additionally, economic and policy uncertainties in China also dampened investors’ mood. The Dow snapped a 3-day winning streak, falling 138 pts to 38,905 as sentiment was dampened by hotter-than-expected Feb PPI and weak Feb retail sales report. Meanwhile, the US10Y Treasury yield jumped 10 bps to 4.29% as the data underscored the Fed’s challenges in achieving its 2% inflation goal, reinforcing bets the Fed will be in no rush to cut rates.

Malaysia. On the back of the recovery in RM (vs USD) from 26Y low of RM4.80 to RM4.68 and expectations of imminent policy easing cycles, KLCI gained 5.2 pts to 1,543.8, led by bargain hunting on selected plantation, telco and banking stocks. Market breadth was positive for a 4th session at 1.07 vs 1.09 previously. Foreign investors continued their net outflows for the 11th out of the 12 sessions (-RM110m, Mar: -RM1.97bn, YTD: +RM30m), followed by local retailers (-RM5m, Mar: +RM77m, YTD: -RM944m) whilst local institutions emerged as the major net buyers (+RM115m, Mar: +RM1.89bn, YTD: +RM913m).

Outlook. We reckon that the market is likely to stay choppy ahead of the Mar 20 FOMC meeting, as persistent foreign outflows (-RM1.97bn in Mar MTD after net buying RM3.81bn from Nov 2023 Feb 2024) and the recent higher-then-expected inflation data could force the market to reassess the timeline for US interest rate cuts. Major supports are pegged at 1,500-1,518-1535 while resistances are situated at 1,559-1,580 levels.

VIRTUAL PORTFOLIO (FIG1): We had squared off our position on EKOVEST (7.9% return) yesterday.

Source: Hong Leong Investment Bank Research - 15 Mar 2024