Risk-on mode return amid easing Middle East tensions

KLCI: 1559.59 (12)
DOW: 38239.98 (253.6)
MSCI Asia: 169.23 (1.8)
FCPO (RM): 3976 (32)
BRENT (USD): 87 (-0.29)
USDMYR: 4.7768 (-0.006)
SGDMYR: 3.5055 (-0.008)
EURMYR: 5.088 (-0.01)
AUDMYR: 3.0736 (0.002)
GBPMYR: 5.8971 (-0.059)
US: 10-yr yield (%) 4.6085 (-0.012)
BNM 10Y MGS (%): 3.96 (0.0)

Asia/US. Most Asian markets rebounded from last week’s routs, taking cues from the easing tensions in Middle East after Iran downplayed Israel’s attack on its soil and stated it has no plan for retaliation. However, sentiment still remained on edge in the face of higher-for-longer Fed rates and the S&P 500 1Q24 results season gaining pace. Dow staged a relief rally for a 3rd consecutive day (+254 pts to 38,240), buoyed by fading concern over a spreading regional war in the Middle East. Investors are gearing up for a busy week filled with corporate earnings reports (i.e. V, TXLA, TXN, META, IBM, GOOGL, INTL, CAT and MSFT) and major economic releases (initial print of 1Q24 GDP growth, PCE inflation, durable goods orders, S&P Global’s PMI for manufacturing and services, and new and pending home sales). 

Malaysia. Tracking regional markets’ rebound and PM’s announcement of setting-up a RM3bn "National Fund-of-Funds" to invest in high-growth companies on Bursa Malaysia and across ASEAN markets, KLCI rallied 12 pts to record its 4th consecutive gain. Foreigners resumed buying after ending its 9th straight day of net outflows amounting to RM2.1bn (+RM115m, Apr: -RM2.18bn, YTD: -RM3.06bn), alongside with the 12th continuous session of net buying by the local institutions (+RM42m, Apr: +RM2.82bn, YTD: +RM5.0bn). Conversely, retailers (-RM157m, Apr: -RM832m, YTD: -RM1.95bn) retained their selling spree for the 5th straight session. 

Outlook. Mirroring overnight Wall St strong recovery and KLCI’s strong close above the bullish support trendline yesterday, the index is poised to surpass 1,565 (YTD high) today. However, we see stiff hurdles at 1,587-1,600 zones as investors recalibrate (i) lingering geopolitical tensions (Israel-Iran and Russian-Ukraine), (ii) a shift in Fed’s rate cut debate, (iii) ongoing US 1Q24 results season, (iv) RM weakness and persistent foreigners’ exodus, and (v) potential earnings disappointment looming from the imminent local 1Q24 results season.