Choppy trend amid heightened geopolitical tensions and Fed pivot rethink 

KLCI: 1553.51 (-6.5)
DOW: 38459.08 (-2.4)
MSCI Asia: 176.46 (-0.5)
FCPO (RM): 4318 (23)
BRENT (USD): 89.74 (-0.74)
USDMYR: 4.7478 (-0.005)
SGDMYR: 3.5319 (0.003)
EURMYR: 5.1545 (-0.005)
AUDMYR: 3.0963 (-0.05)
GBPMYR: 6.0181 (-0.002)
US: 10-yr yield (%) 4.5865 (0.043)
BNM:10-yr yield (%) 3.874 (-0.007)

Asia/US. Asian markets fell, mirroring a sluggish Wall St overnight as the red-hot inflation in US could derail Fed easing cycle. Sentiment was also jolted by escalating geopolitical tensions in Middle East amid news that the US is reportedly bracing for an “imminent” strike by Iran or its proxies against Israel. Dow tumbled as much 264 pts before paring its loss to -2 pts at 38,459, with investors relieved that the Mar core PPI data (+0.2% MoM, forecast: 0.3%) painted a less aggressive growth after Wed's hotter-than-expected core CPI had raised the prospect of higher-for-longer interest rates. The elevated inflation coupled with hawkish-leaning Mar FOMC minutes saw traders sharply cut expectations for 25 bps hike in June to 22% vs 59% a week ago. Meanwhile, all eyes are on a deluge of results from the S&P 500 companies starting tonight (eg JPM, C, WFC and BLK) that will test the sustainability of Dow’s rally (YTD: +2%) in the wake of dwindling consensus expectations for Fed’s rate cuts.

Malaysia. Ahead of the Hari Raya holidays and key US inflation data, KLCI fell 6.5 pts to 1,553.5 on persistent foreign outflows after jumping 29.4 pts in the last six out of seven days. Foreign institutions continued their outflows for the 3rd straight session (-RM108m, Apr: -RM502m, YTD: -RM1.37bn) while local institutions (+RM99m, Apr: +778m, YTD: +RM2.96bn) joined local retailers (+RM9m, Apr: -RM276m, YTD: -RM1.59bn) as major net buyers. 

Outlook In face of the external headwinds and expectations of a lacklustre trading sentiment due to post Hari Raya holidays, the local bourse could be choppy as investors assess (i) Fed’s rate cut policy, (ii) heightened geopolitical tensions and commodity-driven inflation resurgence, (iii) the commencement of the US 1Q24 results season, (iv) RM weakness and persistent foreign net selling (poised for a 7th consecutive week), and (v) the start of Bursa Malaysia 1Q24 results season (expected from the 4th week of April). 

VIRTUAL PORTFOLIO We took profit on EVERGRN (8.5% gain) on 9 Apr.
 

Source: Hong Leong Investment Bank Research - 12 Apr 2024