Consolidation prevails amid Fed rate-cuts jitters, RM weakness and foreign outflows 

KLCI: 1537.01 (-11)
DOW: 39127.14 (-43.1)
MSCI Asia: 175.24 (-1.3)
FCPO (RM): 4407 (0)
BRENT (USD): 89.35 (0.43)
USDMYR: 4.756 (0.003)
SGDMYR: 3.5171 (0.003)
EURMYR: 5.1211 (0.016)
AUDMYR: 3.0945 (0.002)
GBPMYR: 5.9795 (0.006)
US: 10-yr yield (%) 4.3472 (-0.002)
BNM:10-yr yield (%) 3.844 (0)

Asia/US. Most Asian markets fell as solid US economic data and higher commodities prices could slow the Fed’s pivot. Sentiment was also dampened by a 7.2 magnitude earthquake in Taiwan, raising the possibility of fallout for the technology industry and perhaps the global economy. Ahead of the major non-farm jobs data on Friday, the Dow recorded its 3rd straight loss (-43 pts to 39,127) while US10Y bond yield stayed elevated at 4M high near 4.35% after recent batch of mostly strong economic readings and a rally in commodities triggered Fed’s rate-cuts uncertainty as Powell reiterated a wait-and-see approach before embarking on rate cuts this year. On economic front, investors weighed the upbeat ADP survey that cemented a prolonged tightness of the labour market while the unexpected weakening ISM services PMI to a 3M low at 51.4 (forecast: 52.6) threw some cold water on an earlier batch of strong economic releases. 

Malaysia. In line with the sluggish Wall St, KLCI gave back 11 pts after gaining 17.4 pts in the last 3rd straight session, led by banking, utilities and telco stocks. Following a strong net buying of RM3.16bn in Mar, local institutions continued their net buying in Apr (+RM252m, Apr: +326m, YTD: +RM2.51bn) whilst foreign investors (-RM253m, Apr: -218m, YTD: -RM1.09bn) and retail investors (-RM9m, Apr: -RM108m, YTD: -RM1.42bn) emerged as the major net sellers. 

Outlook Technically, barring a decisive fall below 1,500-1,518-1,528 support levels, the odds would still favour for a technical rebound in Apr (resistance: 1,559-1,578-1,600) after losing 1% in March, reflected by the KLCI’s historical average gains of 0.6% and 1.5% over the past 10 and 20 years, respectively. Nevertheless, KLCI is likely to remain choppy as investors weigh expectations for Fed rate-cut policy and RM weakness coupled with persistent foreign net selling (Mar: -RM2.87bn, Apr: -RM218m, YTD: -RM1.09bn). 

Source: Hong Leong Investment Bank Research - 4 Apr 2024