Choppy days prevail amid multiple headwinds ahead 

KLCI: 1540.42 (5.4)
DOW: 37753.31 (-45.7)
MSCI Asia: 169.34 (-0.5)
FCPO (RM): 4024 (12)
BRENT (USD): 87.29 (-2.73)
USDMYR: 4.793 (-0.003)
SGDMYR: 3.5187 (0.004)
EURMYR: 5.1 (0.002)
AUDMYR: 3.0798 (0.002)
GBPMYR: 5.9757 (0.004)
US: 10-yr yield (%) 4.5873 (-0.08)
BNM:10-yr yield (%) 3.94 (0.022)

Asia/US. MSCI All Countries Asia Pacific index slipped 0.29% to 169.34 to record its 6th consecutive decline in the wake of (i) lingering geopolitical shocks in the Middle East, exacerbated by fears surrounding Israel’s potential response to Iran’s unprecedented attack on 13 Apr and (ii) the repricing of Fed rate bets after Powell said restrictive policy needs more time to work toward the central bank's 2% inflation goal. Dow lost 46 pts to record it 7th decline out of the last 8, as the combination of geopolitical uncertainty, elevated interest rates, Fed hawkishness, and inflation frustration have combined to put bears temporarily in charge. On earnings front, UAL and USB prices jumped as earnings beat expectations while ABT fell as results below consensus. 

Malaysia. After a 4-day losing streak of 25 pts, KLCI rebounded 5.4 pts to 1,540.4, led by bargain hunting activities on banking, utilities and telco stocks. Market breadth was bullish at 2.25 vs 0.15 a day ago. Foreign institutions continued their net outflows for the 7th consecutive day (-RM142m, Apr: -RM1.87bn, YTD: -RM2.75bn) followed by the local retailers (-RM6m, Apr: -RM248m, YTD: -RM1.56bn). Conversely, local institutions (+RM148m, Apr: +RM2.12bn, YTD:RM4.31bn) emerged as major net buyers for the 9th straight session. 

Outlook Tracking the Dow’s healthy pullback (-5.35% from all-time high 39,887), KLCI (-1.6% from 52w high 1,565) could extend its consolidation mode for the time being (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 high commodities’ prices and potential supply chain disruptions, (iii) a shift in Fed’s rate cut policy, (iv) ongoing US 1Q24 results season, (v) RM weakness and foreign investors’ exodus, and (vi) potential earnings disappointment from the imminent 1Q24 results season. 

Source: Hong Leong Investment Bank Research - 18 Apr 2024