Choppy trend ahead of Fed policy guidance, RM weakness and persistent foreign outflows 

KLCI: 1545 (-8.7)
DOW: 39111 (321)
FCPO (RM): 4201 (-35)
BRENT (USD): 87.38 (0.49)
USDMYR: 4.737 (0.02)
SGDMYR: 3.526 (-0.00)
EURMYR: 5.133 (-0.01)
AUDMYR: 3.0822 (-0.02)
GBPMYR: 6.00 (-0.01)
US: 10-yr yield (%) 4.29 (-0.03)
BNM:10-yr yield (%) 3.89 (0.02)

Asia/US Ahead of the FOMC meeting on 20 Mar, Asian bourses ended mixed as investors assessed the significant shift in the BOJ policy, marking the end of a 8th year of negative rates (from -0.1% to 0%) and the abolishment of its yield curve control policy. Meanwhile, the SHCOMP retreated by 0.7% due to profit-taking ahead of the PBOC's policy decision today. Deepening property crisis and signs of soft domestic demand continued to dampen investors’ confidence. Dow rallied 321 pts to 39,111, led by mega cap stocks as investors awaited FOMC policy guidance. Meanwhile, the bets for a June cut stood at 60% (vs 62% a week ago) amid worries that the Fed may signal fewer rate cuts this year following hotter-than-expected inflation data recently and a resilient US economy.

Malaysia In wake of renewed RM weakness (vs USD) to 4.73 and persistent outflows by foreigners, KLCI dipped 8.7 pts to 1,545, led by profit taking pullback on CDB, MAYBANK, TENAGA, PMETAL, PETGAS and IHH. Despite the headline loss, market breadth stayed positive for a 7th consecutive session at 1.02 vs 1.14 previously. Foreign investors intensified their net selling for the 14th out of 15 sessions, amounting to RM503m (Mar: -RM2.88bn, YTD: -RM877m), followed by local retailers (-RM21m, Mar: -RM77m, YTD: -RM1.1bn) whilst local institutions emerged as the major net buyers (+RM524m, Mar: +RM2.95bn, YTD: +RM1.97bn).

Outlook Ahead of the FOMC policy guidance, we reckon that the market is likely to stay choppy, as persistent foreign outflows (-RM2.88 in Mar MTD and -RM877m YTD) coupled with renewed RM weakness could propel the KLCI to stay range bound in the short term. Major supports are pegged at 1,518-1,531-1539 while resistances are situated at 1,560-1,580-1,600 levels.
 

Source: Hong Leong Investment Bank Research - 20 Mar 2024