Upward trajectory continues but could face stiff barriers at 1,580-1,600 levels

KLCI: 1561.64 (2.1)
DOW: 38503.69 (263.7)
MSCI Asia: 170.38 (1.2)
FCPO (RM): 3992 (21)
BRENT (USD): 88.42 (1.42)
USDMYR: 4.7803 (0.004)
SGDMYR: 3.5078 (0.002)
EURMYR: 5.0955 (0.008)
AUDMYR: 3.0814 (0.008)
GBPMYR: 5.9086 (0.011)
US: 10-yr yield (%) 4.6004 (-0.008)
BNM:10-yr yield (%) 3.948 (-0.029)

Asia/US. Most Asian markets recovered from last week’s slide, buoyed by a resurgence on Wall St and encouraging business activity indicators from key economies such as Australia, Japan, and India. However, SHCOMP struggled as the lack of fresh policy support dampened investor sentiment amid signs of slowing economic activities in March. Dow staged a relief rally for a 4th consecutive day (+263 pts to 38,503), fuelled by better earnings takeaways from some high-profile companies (i.e. GM, GE, SAP, UPS, SPOT and LMT) and the lack of escalation of Middle East tensions. The bounce was also helped by a weak Apr flash PMI data, challenging bets that the Fed would maintain its restrictive policy. 

Malaysia. Tracking Wall St and regional markets’ rebound, KLCI recorded its 5th straight gain (+2.1 pts to 1,561.6), led by MAYBANK, TENAGA, CIMB, PBBANK and NESTLE. Foreigners resumed their net outflows (-RM135m, Apr: -RM2.32bn, YTD: -RM3.20bn), alongside with retailers (-RM47m, Apr: -RM679m, YTD: -RM1.99bn). Conversely, local institutions (+RM182m, Apr: +RM3bn, YTD: +RM5.19bn) retained their net buying for the 13th straight session. 

Outlook. Technically, in line with Wall St extended recovery and KLCI’s strong close above the bullish support trendline, the index is poised to surpass 1,565 (YTD high) today. However, we see stiff hurdles at 1,580-1,600 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. 
 

Source: Hong Leong Investment Bank Research - 24 Apr 2024