Range bound consolidation within 1,528-1,565 zones amid multiple headwinds ahead 

KLCI: 1575.16 (5.9)
DOW: 38239.66 (153.9)
MSCI Asia: 172.3 (0.8)
FCPO (RM): 3896 (22)
BRENT (USD): 89.5 (0.49)
USDMYR: 4.768 (-0.008)
SGDMYR: 3.5044 (-0.009)
EURMYR: 5.1189 (-0.004)
AUDMYR: 3.1174 (0)
GBPMYR: 5.9679 (-0.009)
US: 10-yr yield (%) 4.663 (-0.041)
BNM:10-yr yield (%) 4.007 (0.041)

Asia/US. Bucking a slide on Dow amid sluggish US 1Q24 GDP and elevated GDP deflator, most Asian markets rose last Friday, buoyed by gains in the technology sector as investors cheered strong earnings from MSFT and GOOGL but anticipation of more cues on core PCE data capped gains. Dow rebounded 154 pts to 38,240, boosted by the “AI and cloud computing craze” following upbeat results by MSFT and GOOGL, overshadowed concerns about a sticky core PCE price (in line, 2.8% YoY) and inflation expectations. On the economic front, all eyes will be on the FOMC meeting guidance (1 May) and Apr jobs data (3 May) coupled with other releases – e.g. Apr PMI surveys, jobs opening, housing starts and consumer confidence index. Earnings season will reach its zenith with major reports from AMZN, KO, LLY, MCD, MA, QCOM, AAPL, SBUX, MMM and AMD.

Malaysia. In sync with regional markets rebound and the return of net inflows by foreigners (weekly: +RM292m) after an RM5.48bn exodus for the 8th consecutive week, the KLCI edged up 5.9 pts to reach a fresh YTD high at 1,575.2 (+27.6 pts WoW), led by YTL, YTLPOWR, TENAGA, CDB, AXIATA and PCHEM. In terms of funds flow, foreigners were the major buyers (+RM103m, Apr: -RM2.01bn, YTD: -RM2.87bn) alongside with local institutions (+RM4m, Apr: +RM2.92bn, YTD: +RM2.92bn). Conversely, local retailers emerged as the single largest sellers (-RM107m, Apr: -RM911m, YTD: -RM2.22bn).  

Outlook As we brace for the “Sell in May and go away” famous maxim in a holiday-shortened week, KLCI could experience profit taking pullback (support: 1,550-1,560, resistance: 1,590-1,600) after recent rally (+2.5% MTD and 8.3% YTD). To recap, May has historically been a weak month for the local bourse with the average 10Y return of -1.3% and a 70% negative returns probability. In the near term, local sentiment will remain cautious as investors recalibrate (i) lingering geopolitical tensions (Israel-Iran and Russian-Ukraine), (ii) Fed’s rate cut repricing, (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 - 29 Apr 2024