Uptrend remains intact but profit taking may cap gains near 1,580-1,600 levels

KLCI: 1571.48 (9.8)
DOW: 38460.92 (-42.8)
MSCI Asia: 173.35 (3)
FCPO (RM): 3957 (15)
BRENT (USD): 88.02 (-0.4)
USDMYR: 4.7773 (-0.003)
SGDMYR: 3.5097 (0.002)
EURMYR: 5.1048 (0.009)
AUDMYR: 3.1044 (0.023)
GBPMYR: 5.9374 (0.029)
US: 10-yr yield (%) 4.6417 (0.041)
BNM:10-yr yield (%) 3.955 (0.007)

Asia/US. In line with an extended rally from Wall St, most Asian markets continued their ascent from last week’s rout, driven by easing Middle East tensions and investors awaited positive earnings expectations from US tech behemoths (i.e. META INTL, MSFT and GOOGL) this week. Ahead of the advanced US 1Q24 GDP (tonight) and Mar PCE inflation (26 Apr) data, coupled with some key results releases by Magnificent 7 companies, Dow fell 42 pts after rallying 750 pts in four consecutive sessions. Meanwhile, the US10Y bond yield rose 4 bps to 4.64%, boosted by better-than-expected US Mar durable goods orders, potentially delaying the first rate cut from June to Sep. On earnings front, TSLA, TXN, AT&T share prices rose on positive results/guidance whilst META and IBM slid amid poor results. Still, corporate earnings have so far surpassed Wall St estimates as over 25% of the S&P 500 that have issued results, 79% have beaten earnings forecasts. 

Malaysia. Tracking further recovery from Wall St and regional markets, KLCI posted its 6th straight gains (+9.8 pts to 1,571.5), led by AXIATA, PMETAL, TENAGA, PBBANK, MAXIS and YTLPOWR. In terms of funds flow, foreigners scooped up RM310m equities yesterday (Apr: -RM2.01bn, YTD: -RM2.89bn) after net selling ~RM5.19bn since end Feb. Conversely, local institutions emerged as net sellers (-RM201m, Apr: +RM2.8bn, YTD: +4.99bn) after net buying for the 13th straight session, alongside with retailers (-RM109m, Apr: -RM788m, YTD: -RM2.10bn). 

Outlook. Technically, KLCI’s bullish technical coupled with mild net buying by foreigners in the last three days may continue to support further KLCI gains today. However, after surging 36.5pts six days in a row, the index could experience 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. 

VIRTUAL PORTFOLIO Yesterday, we took profit on DXN (5.6% return) after hitting R1 upside target.

Source: Hong Leong Investment Bank Research - 25 Apr 2024