Bullish Wall St and a resumption of foreign buying could boost KLCI to retest YTD high at 1,559 levels 

KLCI: 1541.4 (5.61)
DOW: 39781 (269)
FCPO (RM): 4249 (-23)
BRENT (USD): 85.78 (-0.17)
USDMYR: 4.715 (-0.02)
SGDMYR: 3.521 (-0.00)
EURMYR: 5.146 (0.01)
AUDMYR: 3.117 (0.03)
GBPMYR: 6.022 (0.01)
US: 10-yr yield (%) 4.27 (-0.01)
BNM:10-yr yield (%) 3.85 (-0.03)

Asia/US. Asian markets ended mostly higher after Wall Street set new highs on Fed’s rate cuts pivot, which remains on track for three rate cuts this year despite an uptick in inflation and improving GDP growth outlook. All three major US indices ended in record closings (i.e. Dow: +0.6% to 39,781, S&P 500: +0.3% to 5,241, Nasdaq: +0.2% to 16,402) for a 2nd session, lifted by the strong existing home sales and manufacturing PMI readings coupled with the Fed’s intention of three rate cuts this year. The relentless rally was also built on optimism the Fed will be able to engineer a soft landing and bolster the outlook for corporate earnings. On the corporate front, MU (+14%) and FedEX (+34% in extended hours) amid strong earnings whilst NKE lost 6.8% after hours due to weak revenue guidance.

Malaysia. Mirroring gains in Wall St and regional markets, KLCI rose 5.6 pts to 1,541.4 after falling 17.8pts in the last two days, spurred by bargain-hunting activities on CDB, CIMB, SIMEPLT, IOICORP, AXIATA and GENTING. After net selling RM2.89bn in March MTD, foreign investors scooped up RM287m shares (Mar: -RM2.6bn, YTD: -RM597m) whilst local institutions (-RM241m, Mar: +RM2.73bn, YTD: +RM1.75bn) and local retailers (-RM46m, Mar: -RM134m, YTD: -RM1.15bn) emerged as the major net sellers. 

Outlook We expect local sentiment to improve further, driven by another record closings from all three major indices from Wall St overnight, propelled by reinforced guidance from the Fed’s pivot to rate cuts by end 2024. Moreover, the resumption of net buying of RM287m yesterday by foreigners after recording RM2.89bn outflows in Mar MTD, could provide a strong catalyst for the benchmark to revisit YTD high at 1,559 in the near term after building a base near 1,518-1,530 zones.

Source: Hong Leong Investment Bank Research - 22 Mar 2024