Bullish momentum may lift index towards 1,600-1,620 zones before profit taking emerge  

KLCI: 1597.39 (7.8)
DOW: 38852.27 (176.6)
MSCI Asia: 177.83 (0.3)
FCPO (RM): 3898 (36)
BRENT (USD): 83.33 (0.37)
USDMYR: 4.7393 (0.001)
SGDMYR: 3.5097 (0.006)
EURMYR: 5.104 (0.013)
AUDMYR: 3.1405 (0.022)
GBPMYR: 5.9617 (0.01)
US: 10-yr yield (%) 4.4874 (-0.02)
BNM:10-yr yield (%) 3.91 (-0.03)

Asia/US. Asian markets ended higher, taking cues from better-than-expected Caixin manufacturing and services PMIs, coupled with softer-than-expected US jobs data and higher unemployment rate revived hopes for an imminent rate cut. Dow extended its 4th day winning streak (+177 pts to 38,852) amid rate cut hopes. Meanwhile, Brent oil climbed 0.45% as Israel rejected a ceasefire plan backed by Hamas and will continue its operations in Rafah. This week, key economic releases on tap are the US consumer confidence index, Fed official speeches, China’s trade and inflation reports. On earnings front, key results in focus are from VRTX, DIS, ARM and UBER.

Malaysia. In line with higher Wall St and regional markets, KLCI rose for the 3rd straight session (+7.8pts to 1,597.4), led by buying interests on banking and utilities stocks.  Following the massive selling spree in Mar & Apr amounting to RM4.25bn, foreigners returned for bargain hunting for a 6th consecutive day (+RM249m, May: +RM668m, YTD: -RM1.58bn) while local institutions (-RM139m, May: -RM533m, YTD: +RM4.02bn) and local retailers (-RM110m, May: -RM135m, YTD: -RM2.44bn) emerged as major net sellers.

Outlook. Leading up to BNM’s meeting decision on 9 May, KLCI could extend its upward momentum in the near term, fuelled by extended gains from Wall St amid rate cut hopes and the return of foreign funds for a 2nd consecutive week. However, we may see potential profit taking activities after rallying 9.8% YTD near 1,600-1,620 (support: 1565-1,576) amid the upcoming May reporting season and the “Sell in May and go away” famous maxim. 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 - 7 May 2024