Under pressure amid heightened geopolitical tensions and Fed’s rate-cuts caution

KLCI: 1553.24 (16.2)
DOW: 38596.98 (-530.2)
MSCI Asia: 176.47 (1.2)
FCPO (RM): 4356 (-44)
BRENT (USD): 90.65 (1.3)
USDMYR: 4.7402 (-0.016)
SGDMYR: 3.519 (0.002)
EURMYR: 5.1472 (0.026)
AUDMYR: 3.1302 (0.036)
GBPMYR: 6.0033 (0.024)
US: 10-yr yield (%) 4.3094 (-0.038)
BNM:10-yr yield (%) 3.857 (0.013)

Asia/US. Ahead of the major US jobs data tonight, most Asian markets staged a mild technical rebound after routs, taking cues from a positive Caixin China General Composite PMI (rose to 10M high in March at 52.7) and expectations that the Fed will loose monetary policy this year as inflation figures did not materially change the overall picture. The Dow jumped as much as 294 pts in early trades amid rising weekly jobless claims (to a 2M high) and job cuts (highest in 14M), leaning towards for a Fed’s pivot this year. However, the index took a sharp fall to end -530 pts to 38,597 following (i) a hawkish comment from Fed Kashkari that the central bank should cut rates at all if inflation remained sticky, and (ii) rising inflation risk amid recent spike in oil prices following mounting tension in Middle East as Netanyahu said the country will operate against Iran and its proxies in the face of imminent threat expected from Iran.

Malaysia. In line with the technical rebound from regional markets, KLCI rallied 16.2 pts to 1,553.2, led by bargain hunting on PMETAL, TENAGA, SIMEPLT, PBBANK, CIMB and MAYBANK. Market breadth was bullish at 1.87 vs 0.81 previously. Local retailers emerged as major net sellers, extended its net selling for a 20th consecutive session amounting to RM664m (-RM91m, Apr: -RM199m, YTD: -RM1.51bn) whilst local institutions (+RM76m, Apr: +402m, YTD: +RM2.59bn) and foreign investors (+RM15m, Apr: -RM203m, YTD: -RM1.07bn) were the major net buyers. 

Outlook. Tracking overnight rout from Wall St, we expect a spike in volatility ahead for the KLCI (support: 1,500-1,518-1,529; resistance: 1,559-1,579) as investors weigh (i) expectations for Fed rate-cut policy; (ii) persistent foreign outflows; (iii) USD strength amid its safe haven status as geopolitical tensions ratcheted up (iv) "risk premium" added to oil prices fanning inflation risk.

Source: Hong Leong Investment Bank Research - 5 Apr 2024