Under siege amid spiking US yields, falling RM and heavy foreign selling

KLCI: 1542.53 (-8.5)
DOW: 37735.11 (-248.1)
MSCI Asia: 173.49 (-1.8)
FCPO (RM): 4122 (-82)
BRENT (USD): 90.1 (-0.35)
USDMYR: 4.78 (0.01)
SGDMYR: 3.5133 (0.002)
EURMYR: 5.0929 (0.007)
AUDMYR: 3.0986 (-0.005)
GBPMYR: 5.9681 (0.006)
US: 10-yr yield (%) 4.6014 (0.08)
BNM:10-yr yield (%) 3.918 (0.008)

Asia/US. Asian markets skidded in early trades, taking cues from the escalating tensions in the Middle East following Iran's direct attack on Israel from Iranian territory over the weekend. However, the heavy losses narrowed after Iran stated that the 'matter can be deemed concluded' unless there is further violence, while the US declared that it would not participate in any retaliatory action by Israel against Iran. Dow tumbled 248 pts at 37,735 while the US10Y bond yield jumped 9 bps to 4.61% as heightened tensions in the Middle East (amid concerns about Israel's potential retaliation) and the red-hot March retail sales spurred bets the Fed rates will stay higher for longer, overshadowed upbeat results from GS. Major market events to focus for the rest of the week include: (i) earnings season (BAC, J&J, MS, UNH, TSMC, NFLX, AXP and PG) and (ii) economic indicators (Fed officials’ speeches, housing starts). 

Malaysia. Mirroring the slide on Wall St and regional markets, KLCI slipped 8.5 pts to 1,542.5 amid significant outflows by foreigners (the largest single-day exodus in more than 3 years) and a subdued RM (vs USD). Market breadth was bearish at 0.23 vs 1.13 last Friday. Foreign institutions intensified their outflows for the 5th straight session (-RM530m, Apr: -RM1.24bn, YTD: -RM2.11bn) while local retailers (+RM60m, Apr: -RM220m, YTD: -RM1.53bn) joined local institutions (+RM470m, Apr: +RM1.46n, YTD:RM3.64bn) as major net buyers. 

Outlook. Tracking the US markets’ healthy pullback (-5.4% from all-time high 39,887), KLCI may continue its sideways consolidation (support: 1,518-1,529-1,538; resistance:1,560-1,565-1,583) as investors recalibrate (i) heightened geopolitical tensions (Israel-Iran and Russian-Ukraine), (ii) inflation resurgence due to rising commodities’ prices and potential supply chain disruptions, (iii) delay in Fed’s rate cut policy, (iv) ongoing US 1Q24 results season, (v) RM weakness and persistent foreign net selling, and (vi) potential earnings disappointment from the imminent 1Q24 results season. 

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