Cautious Undertone Ahead of the Peak of the May Results Season and Fed’s Rate-cut Jitters

KLCI: 1619.4 (-9.8)
DOW: 39069.59 (4.3)
MSCI Asia: 179.39 (-1.4)
FCPO (RM): 3885 (-9)
BRENT (USD): 82.12 (0.76)
USDMYR: 4.7115 (0.008)
SGDMYR: 3.4889 (0.003)
EURMYR: 5.1021 (0)
AUDMYR: 3.1155 (-0.008)
GBPMYR: 5.9877 (0.002)
US: 10-yr yield (%) 4.465 (-0.012)
BNM:10-yr yield (%) 3.891 (0.021)

Asia/US. Tracking the Dow’s overnight rout, Asian markets fell as lingering concerns over sticky US inflation and restrictive Fed rates battered sentiment. Meanwhile, the persistent US-China trade tensions and China’s military drills near Taiwan kept investors on the edge. Ahead of the Memorial Day holiday on 27 May, the NASDAQ surged 1.1% to a new record high of 16,929 as the NVDA-led rally buoyed bullish bets on tech stocks. In contrast, the Dow only inched up 4 pts after surrendering its early gains of 155 pts, as investors weighed fresh data showing US durable goods order unexpectedly rose and the 1Y ahead inflation expectations soared to a 6M high of 3.3% in May. Key economic data in focus this week are the PCE Price Index, personal income and spending and speeches by several Fed officials.

Malaysia. In sync with the sluggish Wall St and regional markets, KLCI slid 9.8 pts to 1,619.4, led by profit taking pullback on selected heavyweights i.e. YTL, YTLPOWR, PBBANK, PETDAG, HLBANK and MISC. Market breadth plunged to 0.53 vs 1.4 a day ago while ADTV reduced 8.9% to 5.61bn shares valued at RM4.58bn. Foreigners (-RM77m, May: +RM2.72bn, YTD: +RM475m) and retailers (-RM20m, May: -RM1.03bn, YTD: -RM3.35bn) were major net sellers while local institutions (+RM97m, May: -RM1.69bn, YTD: +RM2.87bn) emerged as net buyers. 

Outlook After surging 43 pts/2.4% in May MTD (2QTD: 83 pts/5.4%, YTD: +165 pts/11.3%), KLCI may consolidate further (resistance: 1,640-1,660 levels) as investors navigate the peak of the May results season (a reality-check to sustain further gains) and Fed’s rate-cut uncertainty. Nevertheless, downside risk is likely to be cushioned near 1,590-1,600-1,613 zones, boosted by the return of foreign investors for a 5th straight week (May MTD: +RM2.73bn, Mar & Apr: -RM4.25bn), clearer policy frameworks in attracting FDI along with trends such as China + 1, as well as political stability to expediate economic and fiscal reforms to foster long-term growth and competitiveness.

Source: Hong Leong Investment Bank Research - 27 May 2024