Downside bias with key supports at 1,580-1600 to prevent further slide towards 1,565

KLCI: 1605.35 (-10.5)
DOW: 38441.54 (-411.3)
MSCI Asia: 178.23 (-2.8)
FCPO (RM): 4022 (-12)
BRENT (USD): 83.6 (-0.62)
USDMYR: 4.7045 (0.015)
SGDMYR: 3.4862 (0.006)
EURMYR: 5.1051 (0.003)
AUDMYR: 3.1257 (0.003)
GBPMYR: 6.0032 (0.011)
US: 10-yr yield (%) 4.6117 (0.062)
BNM:10-yr yield (%) 3.881 (0.01)

Asia/US. Ahead of the inflation readings (from the US and Eurozone) and China PMI data later this week, most Asian markets ended lower, as surging global bond yields and hawkish signals from the Fed officials’ speeches unsettled investors. In contrast, SHCOMP inched up 1.5 pts following IMF’s upgrade on China’s 2024 GDP forecast to 5% from 4.6% due to strong 1Q24 data and supportive policy measures. Dow plunged 411 pts to 38,441, driven by soaring bond yields following disappointing bond auctions, falling expectations for Fed rate cuts in Sep on upbeat US consumer confidence, increasing inflation expectations and hawkish comments from President Kashkari. Meanwhile, the Fed’s preferred inflation gauge ie PCE price index (due on Friday) will be closely watched for clues about the Fed’s upcoming policy path. 

Malaysia. KLCI fell for a 4th straight session (-10.5 pts to 1,605.4) as investors assessed the climax of the May results season and Fed’s rate-cut jitters coupled with the resumption of foreign net selling. Market breadth stayed negative for the 4th consecutive session at 0.48 vs 0.43 a day ago while ADT volume shrank 2.5% to 4.74bn shares valued at RM3.69bn. Foreigners continued their net selling for a 4th straight day after five consecutive week of net inflows (-RM313m, May: +RM2.06bn, YTD: -RM190m) while local institutions (+RM265m, May: -RM1.1bn, YTD: +RM3.46bn) and retailers (+RM48m, May: -RM962m, YTD: -RM3.27bn) emerged as major net buyers. 

Outlook. After rallying 29.3 pts or 1.9% May MTD (Apr: 39.9 pts /2.6%; YTD: +150.7 pts/10.4%), KLCI may consolidate its gains (resistance: 1,616-1,635-1,650 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 1,580-1,600 zones, boosted by 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.