Extended consolidation amid prevailing headwinds

KLCI: 1535 (-7.5)
DOW: 37798.97 (63.9)
MSCI Asia: 169.84 (-3.7)
FCPO (RM): 4083 (9)
BRENT (USD): 90.02 (-0.08)
USDMYR: 4.7957 (0.016)
SGDMYR: 3.5146 (0.001)
EURMYR: 5.0977 (0.005)
AUDMYR: 3.0781 (-0.02)
GBPMYR: 5.9714 (0.003)
US: 10-yr yield (%) 4.6674 (0.066)
BNM:10-yr yield (%) 3.94 (0.022)

Asia/US. In sync with an extended rout on Wall St, Asian markets tumbled as upbeat US March retail sales solidified expectations that the Fed rate will stay higher for longer. Sentiment was further exacerbated by fears surrounding Israel’s potential response to Iran’s unprecedented weekend attack, as well as China’s mixed economic indicators as the 1Q24 GDP beat expectations whilst March retail sales and industrial production fell short of consensus. After plummeting 1,169 pts in the last six days, the Dow rebounded as much as 257 pts before trimming the gains to 64 pts at 37,799, as investors grappled with a mixed batch of results, sluggish housing starts and building permits, coupled with Powell’s hawkish view that interest rates may need to stay elevated to tame sticky inflation. On earnings front, MS and UNH jumped amid upbeat earnings while JNJ and BAC fell on heels of mixed results. 

Malaysia. In tandem with the gloomy sentiment on Wall St and regional markets, KLCI lost 7.5 pts at 1,535 to register its 4th consecutive loss. Market breadth was extremely bearish at 0.15 vs 0.23 previously. Foreign institutions continued their heavy selling (-RM491m, Apr: -RM1.73bn, YTD: -RM2.60bn) while local retailers followed suit (-RM22m, Apr: -RM242m, YTD: -RM1.55bn). Conversely, local institutions (+RM513m, Apr: +RM1.97bn, YTD:RM4.16bn) emerged as major net buyers for the eight consecutive session

Outlook. Tracking the US markets’ healthy pullback (-5.2% from all-time high 39,887), KLCI (-1.9% from 52w high 1,565) could extend its consolidation following the major support trendline breakdown yesterday (support: 1,518-1,528; resistance:1,565-1,583) as investors recalibrate (i) prevailing 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. 

VIRTUAL PORTFOLIO We closed our technical pick on MCEHLDG (5.6% loss) yesterday after hitting cut loss level.

Source: Hong Leong Investment Bank Research - 17 Apr 2024