A healthy profit taking pullback expected after blistering rally YTD with key supports situated at 1,550-1,565-1,588 zones  

KLCI: 1601.22 (-3.5)
DOW: 39387.76 (331.4)
MSCI Asia: 176.3 (-0.2)
FCPO (RM): 3801 (-30)
BRENT (USD): 83.88 (0.3)
USDMYR: 4.741 (-0.001)
SGDMYR: 3.4952 (-0.002)
EURMYR: 5.0873 (-0.011)
AUDMYR: 3.1172 (0.002)
GBPMYR: 5.9198 (-0.004)
US: 10-yr yield (%) 4.4531 (-0.041)
BNM:10-yr yield (%) 3.93 (0.02)

Asia/US. Asian markets took a breather after recent rallies, with investors awaited more comments from Fed officials regarding the interest rate outlook. On a separate note, China and Hong Kong markets extended their gains, driven by bullish Apr trade data showing an 8.4% increase (forecasts: 5.4%) in imports alongside a 1.5% growth in exports (forecast: 1). Dow hit its winning streak for a 7th straight day (+331 pts to 39,387) as higher-than expected weekly jobless claims to 8M high rekindled hopes for a potential interest rate cut as early as Sep, prior to next week's major signposts from PPI, CPI and Powell’s speech. On earnings front, both ARM and ABNB fell 2.3% and 6.9% respectively on weak revenue guidance.

Malaysia. Mirroring the mixed Asian market, KLCI lost 3.5 pts at 1,601.2 on healthy profit taking pullback, with ADTV shed 12.3% to RM3.13bn. Despite the headline loss, market breadth returned to positive territory at 1.3 from 0.99 previously, boosted by BNM’s optimism that the Malaysian economy is expected to improve further while inflation will be moderate. After net selling RM1.6bn trades 7th day in a row, local institutions turned net buyers (+RM44m, May: -RM1.02bn, YTD: +RM3.54bn) whilst local retailers (-RM34m, May: -RM112m, YTD: -RM2.61bn) and foreigners (-RM10m, May: +RM1.3bn, YTD: -RM933m) emerged as major net sellers.

Outlook. As expected, KLCI fell for a 2nd session due to healthy proft taking pullback in wake of the upcoming crucial May reporting season, “Sell in May and go away” adage and overbought technical readings. Nevertheless, downside risk is likely to be cushioned near 1,550, 1,565 and 1,585 support levels (resistance: 1,620-1,640), buoyed by sustained gains from Wall St amid rate-cut hopes, improved risk appetite by investors, undemanding KLCI CY24 P/E at 14.7x (vs 10Y average 18x) coupled with recent high profile investments announced by multinationals.

Source: Hong Leong Investment Bank Research - 10 May 2024