Profit taking to cap gains near 1,580-1,600

KLCI: 1569.25 (-2.2)
DOW: 38085.8 (-375.1)
MSCI Asia: 171.53 (-1.8)
FCPO (RM): 3850 (-24)
BRENT (USD): 89.01 (0.99)
USDMYR: 4.776 (-0.001)
SGDMYR: 3.5132 (0.003)
EURMYR: 5.123 (0.018)
AUDMYR: 3.1176 (0.013)
GBPMYR: 5.9767 (0.039)
US: 10-yr yield (%) 4.7039 (0.062)
BNM:10-yr yield (%) 3.966 (0.011)

Asia/US. Most Asian markets fell prior to the release of US advance 1Q24 GDP and core PCE data. Sentiment was also jolted a sharp decline in US stock futures following downbeat results from META and IBM. Dow nosedived as much as 707 pts before paring the loss to -375 pts at 38,086, rattled by ‘stagflation jitters” amid the sluggish US advance 1Q24 GDP and elevated PCE prices coupled with a slew of poor results from CAT, META and IBM. Meanwhile, the US10Y Treasury yield jumped 7 bps to a 6M high at 4.70%, as recent data dashed Fed’s pivot hopes. After market, INTL share price slid on weak guidance while MSFT and GOOGL jumped on earnings beat and positive guidance.

Malaysia. Tracking the Wall St and regional markets’ consolidations, KLCI eased 2.2 pts to 1,569.3, halting its 6-day winning streak, led by PCHEM, PMETAL GENM, GENTING and PBBANK. In terms of funds flow, foreigners continued their net outflows again (-RM100m, Apr: -RM2.11bn, YTD: -RM2.99bn) alongside with local retailers (-RM16m, Apr: -RM804m, YTD: -RM2.11bn). Conversely, local institutions emerged as the sole net buyers (+RM116m, Apr: +RM2.92bn, YTD: +RM5.1bn).  

Outlook. In sync with Dow’s cautious undertone (-4.5% from the peak of 39,887) and a dearth of domestic catalysts, KLCI may extend its healthy overbought pullback in the short term. We expect volatility ahead (support: 1,550-1,560, resistance: 1,580-1,600) as investors recalibrate (i) lingering geopolitical tensions (Israel-Iran and Russian-Ukraine), (ii) a shift in Fed’s rate cut policy, (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 CLOUDPT (6.6% return) and KIMLUM (9.9% return).

Source: Hong Leong Investment Bank Research - 26 Apr 2024