Current rally could stall near formidable barriers at 1,620-1,642 levels due to overbought readings 

KLCI: 1605.6 (8.2)
DOW: 38884 (32)
FCPO (RM): 3930 (67)
BRENT (USD): 83.16 (-0.17)
USDMYR: 4.7388 (-0.00)
SGDMYR: 3.50 (-0.01)
EURMYR: 5.0987 (-0.01)
AUDMYR: 3.125 (-0.02)
GBPMYR: 5.9412 (-0.02)
US: 10-yr yield (%) 4.46 (-0.03)
Mal: BNM 10Y MGS (%): 3.91 (0.0)

Asia/US. Asian markets ended mixed after recent rallies as investors awaited Fed officials’ speeches for more cues on interest rates path. Dow extended its 5th day winning streak, eking out a 32-pt gain after rising as much as +125 pts to record its 5th day winning streak. Sentiment turned cautious as markets weighed a weak May Economic Optimism index at 41.8 (lowest in 5M) and looked to Fed speakers for further insights into the interest rate outlook, with the probability of a rate cut in September currently estimated at around 65%. Earnings front, DIS slipped 9.5% on revenue miss and cautious outlook guidance. 

Malaysia. Copying higher Wall St and persistent foreign net inflows, KLCI jumped 8.2 pts at 1,605.6, recording its 6th day gain out of seventh, supported by a 21% hike in daily volume to 5.4bn shares valued at RM3.79bn. Following the massive selling spree in Mar & Apr amounting to RM4.25bn, foreigners returned for bargain hunting for a 7th consecutive day (+RM337m, May: +RM1.0bn, YTD: -RM1.24bn) while local institutions (-RM228m, May: -RM761m, YTD: +RM3.8bn) and local retailers (-RM109m, May: -RM244m, YTD: -RM2.55bn) continued their selling mode. 

Outlook Leading up to BNM’s meeting decision on 9 May, KLCI could extend its upward momentum in the near term, buoyed by sustained gains from Wall St amid rate cut hopes and the influx of foreign funds for a 7th consecutive session. However, the benchmark could witness formidable barriers at 1,620-1,642 zones (support: 1,550, 1,565 and 1,581), potentially triggering profit-taking activities, in wake of the upcoming May reporting season, “Sell in May and go away” adage and overbought technical readings. 

Source: Hong Leong Investment Bank Research - 8 May 2024