Range bound mode as investors assess upcoming US PCE data and sustainability of foreign buying resumption 

KLCI: 1542.39 (1)
DOW: 39475.9 (-305.5)
MSCI Asia: 177.44 (-0.7)
FCPO (RM): 4188 (-61)
BRENT (USD): 85.43 (-0.35)
USDMYR: 4.7365 (0.021)
SGDMYR: 3.5118 (-0.01)
EURMYR: 5.123 (-0.023)
AUDMYR: 3.0852 (-0.031)
GBPMYR: 5.9621 (-0.06)
US: 10-yr yield (%) 4.1981 (-0.069)
BNM:10-yr yield (%) 3.851 (-0.007)

Asia/US. MSCI All Countries Asia Pacific index eased 0.38% on profit taking but still jumped 1.6% WoW to 177.4, as the March FOMC meeting bolstered hopes for three interest rate cuts this year, highlighting expectations for continued economic growth and disinflation. 

After rallying 1,066 pts in the last four consecutive sessions, Dow tumbled 305 pts to 39,476 (+2% WoW) on profit taking, led by NKE (-7%), V (-2.3%), Caterpillar (-1.8%), GS (-1.7%) and AXP (-1.4%) whilst the Nasdaq ended +27 pts to a new high at 16,429 (+2.8% WoW), driven by ongoing tech strength amid market expectations for the Fed’s pivot to rate cuts. This week, inflation will be back in the spotlight, with PCE inflation data and Powell’s speech due out on Friday. Additional updates of interest include personal income and spending, the final 4Q23 GDP and the housing market.

Malaysia. Tracking a mixed regional market, KLCI inched up 1-pt to 1,542.4 (-10.4 pts WoW) after hovering within 1,537.9-1,543.8. Market breadth was negative at 0.99 after staying positive in the last nine consecutive sessions. After net selling RM2.89bn from 1-20 Mar, foreign investors turned net buyers for a 2nd straight day (+RM157m, Mar: -RM2.44bn, YTD: -RM440m) whilst local institutions (-RM152m, Mar: +RM2.58bn, YTD: +RM1.60bn) and local retailers (-RM5m, Mar: -RM139m, YTD: -RM1.16bn) emerged as the major net sellers. 

Outlook Pending fresh domestic catalysts, we expect KLCI to trend sideways this week (support: 1,518-1,529) as we await US PCE inflation data and Powell’s speech for clearer insights of Fed’s future policy. Following the significant weekly foreign outflow of RM1.51bn (week ended 8 Mar), foreign net outflows continued to decrease for a 2nd consecutive week. Continued net inflows by foreign investors this week amid weak RM (vs USD) and undemanding valuation of 12.8x CY24 P/E (vs 10Y 17.2x) after recent sell-down could provide upward momentum for KLCI to re-challenge the YTD high of 1,559 and 1,580 next.

Source: Hong Leong Investment Bank Research - 25 Mar 2024