Consolidating upward

KLCI: 1602.91 (2.2)
DOW: 39431.51 (-81.3)
MSCI Asia: 178.18 (0.6)
FCPO (RM): 3893 (25)
BRENT (USD): 83.36 (0.57)
USDMYR: 4.7295 (-0.01)
SGDMYR: 3.4939 (-0.009)
EURMYR: 5.0998 (-0.01)
AUDMYR: 3.1255 (-0.008)
GBPMYR: 5.9254 (-0.013)
US: 10-yr yield (%) 4.4865 (-0.01)
BNM:10-yr yield (%) 3.899 (0)

Asia/US. Asian markets ended mixed as investors awaited major inflation data from the US, Japan and India coupled with Japan’s 1Q24 GDP this week. Sentiment was also cautious as investors weighed Biden’s upcoming new China tariffs as soon as today on EV, medical supplies and solar equipment as well as China’s impending sale of 1 trillion-yuan worth of ultra-long sovereign bonds as it seeks to raise funds to stimulate the economy. Dow lost 82 pts at 39,431, snapping its 8-day winning streak as investors weighed the 6M high consumer inflation expectations for the year ahead and positioned for the key economic indicators (eg CPI, PPI, retail sales etc) as well as statements from various Fed officials, which will help shape the outlook for Fed policy. On the earnings front, major earnings reports in focus are Home Depot, Cisco and Walmart.

Malaysia. After falling 4.9 pts three days in a row from a 2Y high of 1,610.3 (7 May), KLCI gained 2.2 pts to 1,602.9, led by GENTING, GENM, CIMB, AXIATA, HLFG and PPB. Market breadth was positive for the 3rd consecutive day at 1.3 vs 1.12 last Friday. Foreigners continued their net buying in 11th out of the last 12 sessions (+RM28m, May: +RM1.40bn, YTD: -RM843m) while retailers (+RM4m, May: -RM266m, YTD: -RM2.58bn) and local institutions (-RM24m, May: -RM1.14bn, YTD: +RM3.42bn) emerged as major net sellers. 

Outlook. KLCI may waver in the short term as investors brace for the key US inflation data and Powell’s speech, ongoing May reporting season, and overbought technical readings. Nevertheless, downside risk is likely to be cushioned near 1,574-1,594 support levels (resistance: 1,620-1,642), a resumption in net buying by foreigners in May MTD (after recording RM4.25bn net outflows in Mar-Apr), undemanding KLCI CY24 P/E at 14.8x (vs 10Y average 18x), recent high-profile investments announced by multinationals, and strengthening local political stability and a gradual roll out of economic and fiscal reform initiatives to facilitate long-term growth and competitiveness.

Source: Hong Leong Investment Bank Research - 14 May 2024