Stiff hurdles at 1,600-1,620 to cap further gains

KLCI: 1580.3 (4.3)
DOW: 38225.66 (322.4)
MSCI Asia: 175.88 (2.3)
FCPO (RM): 3830 (-16)
BRENT (USD): 83.67 (0.23)
USDMYR: 4.7545 (-0.017)
SGDMYR: 3.498 (0.003)
EURMYR: 5.089 (0.002)
AUDMYR: 3.1054 (0.013)
GBPMYR: 5.9501 (-0.007)
US: 10-yr yield (%) 4.5811 (-0.047)
BNM:10-yr yield (%) 3.971 (-0.012)

Asia/US. MSCI All Countries Asia Pacific index rallied 1.3% to 175.88 as market breathed a sigh of relief amid Powell’s less hawkish remark of downplaying a rate hike and a reduction of balance-sheet runoff (to USD25bn from USD60bn) starting in June. Ahead of the key nonfarm jobs data tonight, the Dow extended its winning streak for a 2nd day (+322 pts to 38,225) while US10Y bond yield shed 5 bps to 4.58%, as sentiment was boosted by megacap stocks amid upbeat earnings from QCOM and Powell’s remark of ruling out an interest rate hike as the central bank’s next move. After hours, AAPL jumped 2.2% on positive outlook

Malaysia. KLCI rose 4.3 pts to 1,580.3 to record its 9th gain out 11 sessions as sentiment was buoyed by (i) Microsoft’s proposed RM10.5bn investment in Malaysia's cloud and AI infrastructure, (ii) Powell’s dismissal of rate-hike talk, and (iii) the return of foreign inflows for the 4th straight day. Foreigners returned for bargain hunting (+RM43m, Apr: -RM1.37bn, YTD: -RM2.21bn) alongside with local retailers (+RM18m, Apr: -RM998m, YTD: -RM2.29bn) while local institutions (-RM61m, Apr: +RM2.37bn, YTD: +RM4.5bn) were the major net sellers. 

Outlook. Ahead of the key US March non-farm payrolls data tonight, KLCI could turn choppier with key barriers at 1,600-1,620 (support: 1,548-1,565) as investors brace for the upcoming May reporting season, higher-for-longer Fed rates, as well as the “Sell in May and go away” famous maxim after recent rally (+8.6% YTD). To recap May has historically been a weak month for the local bourse with the average 10 Y return of -1.3% and a 70% negative returns probability. 

Source: Hong Leong Investment Bank Research - 3 May 2024