Extended consolidation as investors brace for May’s peak results season and upcoming US and Eurozone inflation data

KLCI: 1615.82 (-2.5)
DOW: 38852.86 (-216.7)
MSCI Asia: 181 (-0.2)
FCPO (RM): 3981 (21)
BRENT (USD): 84.22 (1.12)
USDMYR: 4.69 (-0.006)
SGDMYR: 3.4798 (-0.002)
EURMYR: 5.1019 (-0.002)
AUDMYR: 3.1229 (0.002)
GBPMYR: 5.9919 (0.002)
US: 10-yr yield (%) 4.55 (0.085)
BNM:10-yr yield (%) 3.871 (-0.017)

Asia/US. Asian markets ended mixed as investors shied away from big bets before the BOJ’s interest rates outlook today, major inflation readings (from the US and Eurozone) coupled with key Chinese PMI index data later this week. Nasdaq surged 0.6% to a fresh record high at 17,020, benefitting from AI-related stocks (i.e. NVDA, ARM, and AMD) following reports that AI will utilize the chipmaker’s H100 graphics processing units. In contrast, the Dow tumbled 217 pts to 38,852 as sentiment was dampened by soaring Treasury yields after weak debt auctions, hawkish comment from President Kashkari that he wouldn't rule out additional rate hikes due to sticky inflation and ahead of the crucial PCE data on Friday.

Malaysia. KLCI continued its healthy profit taking pullback for a 3rd straight session (-2.5 pts to 1,615.8) as investors assess May’s peak results season this week and Fed’s rate-cut uncertainty. Market breadth deteriorated to 0.43 vs 0.78 a day ago while ADT volume shrank 13.8% to 4.86bn shares valued at RM3.8bn. Foreigners continued their profit taking for a 3rd straight day after five consecutive week of net inflows (-RM177m, May: +RM2.37bn, YTD: +RM123m) while local institutions (+RM154m, May: -RM1.36bn, YTD: +RM3.2bn) and retailers (+RM23m, May: -RM1.01bn, YTD: -RM3.32bn) emerged as net buyers. 

Outlook After rallying 39.8 pts/2.5% in May MTD (2QTD: 79.8 pts/5.2%, YTD: +161.2 pts/11.1%), KLCI may consolidate (resistance: 1,635-1,650 levels) further as investors navigate the peak of the May results season and Fed’s rate-cut uncertainty. Nevertheless, downside risk is likely to be cushioned at 1,590-1,610 zones, boosted by the return of foreign investors (May MTD: +RM2.37bn, Mar & Apr: -RM4.25bn), a more stable RM, 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.

Virtual Portfolio: We squared off our positions on KGW (13.5% return) and CARLBRG (2.1% loss) yesterday.

Source: Hong Leong Investment Bank Research - 29 May 2024