Market to remain choppy amid rate-cut jitters and persistent foreign outflows 

KLCI: 1544.02 (7.9)
DOW: 39566.85 (-240)
FCPO (RM): 4247 (-20)
BRENT (USD): 87.42 (-0.06)
USDMYR: 4.7305 (0.006)
SGDMYR: 3.5071 (0.006)
EURMYR: 5.1024 (0.009)
AUDMYR: 3.0852 (0.007)
GBPMYR: 5.9702 (0.01)
US: 10-yr yield (%) 4.3092 (0.109)
BNM:10-yr yield (%) 3.83 (-0.009)

Asia/US. Most Asian markets ended higher, led by a 1.2% rally in SHCOMP as upbeat PMI data reinforced recovery hopes, overshadowed a 1.4% slide in Nikkei 225 amid a cautious 1Q24 Tankan survey and Tokyo’s stern warning of possible government intervention due to speculative moves in the currency market that did not reflect economic fundamentals. Following the superb rallies in Mar (2.1%) and 1Q24 (5.6%), Dow succumbed to profit taking on debut in April (-240 pts to 39,567) as a solid US March manufacturing PMI (first expansion in 18M) bolstered Fed’s stance in maintaining a cautious approach for cutting rates. Further key economic reports under scrutiny this week for insights into central bank policy are JOLTS, non-farm payrolls and services PMI. 

Malaysia. Tracking higher regional markets and 1Q24 window dressing, KLCI gained 5.5 pts to 1,536.1 (Mar: -1%, 1Q: 5.6%). Market breadth recovered to 1.1 vs 0.65 previously. Foreign investors resumed their net selling for a 3rd consecutive session (-RM106m, Mar: -RM2.87bn, YTD: -RM875m), while retail investors extended their net outflows for a 16th straight day (-RM80m, Mar: -RM292m, YTD: -RM1.31bn). Meanwhile, local institutions (+RM186m, Mar: +RM3.16bn, YTD: +RM2.18bn) emerged as the major net buyers for a 3rd day. 

Outlook KLCI slid 1% in Mar, halting its 5M winning streak. Technically, barring a decisive fall below 1,500-1,518-1,528 support levels, the odds would still favour the bulls to resume its ascent in Apr, reflected by KLCI’s historical average gains of 0.6% and 1.5% over the past 10 and 20 years, respectively. Although the China’s upbeat March manufacturing (12M high at 50.8) and services (9M high to 53) PMIs could provide a boost to local bourse, lingering worry over higher-for-longer Fed rates following recent better-than-expected US economic data coupled with persistent foreign outflows may restrict further upside at 1,559-1,573 zones. 

Source: Hong Leong Investment Bank Research - 2 Apr 2024