Technical rebound in the offing?

KLCI: 1596.68 (-7.6)
DOW: 38571.03 (-115.3)
MSCI Asia: 180.24 (3.4)
FCPO (RM): 4076 (83)
BRENT (USD): 78.36 (-3.26)
USDMYR: 4.7065 (0.002)
SGDMYR: 3.4816 (0)
EURMYR: 5.1054 (0.018)
AUDMYR: 3.1263 (-0.002)
GBPMYR: 5.9889 (0.009)
US: 10-yr yield (%) 4.3884 (-0.11)
BNM:10-yr yield (%) 3.871 (-0.022)

Asia/US. Asian markets ended mostly higher, driven by a combination of factors including (i) a strong lead from Wall Street amid slower-than-expected US core PCE inflation, (ii) exit polls predicting Modi's landslide victory in India and a robust Q1 GDP report, (iii) looked forward to a rate cut in Europe as the next step in global policy easing, and (iii) encouraging manufacturing activities from China (private Caixin survey), Japan, and South Korea. Dow slid as much as 439 pts on profit taking after surging 575 pts on 31 May before narrowing the losses to end -115 pts at 38,571, as weak manufacturing data dampened sentiment while the Fed awaited the still elevated inflation to decline to cut interest rates. Meanwhile, other key economic data such as the job opening and factory order data for April as well as May payrolls report this week will be closely watched for clues about the Fed’s future policy path. 

Malaysia. In line with the rout from Wall St and the MSCI rebalancing exercise, KLCI recorded its 6th consecutive decline, falling 7.6 pts to 1,596.7 (WoW: -22.7 pts) on 31 May, led by the selling pressures on YTL, YTLPOWR, CDB, GENM and TENAGA. Market breadth stayed negative for the 6th consecutive session at 0.43 from 0.93 previously, while trading value surged 80% to RM6.85bn compared with the RM3.80bn average for the last 20 trading days of May. Foreigners continued their net selling for a 6th straight day (-RM489m, May: +RM1.48bn, YTD: -RM766m) while local institutions (+RM342m, May: -RM654m, YTD: +RM3.90bn) and retailers (+RM147m, May: -RM830m, YTD: -RM3.14bn) emerged as major net buyers. 

Outlook. After rallying 60.6 pts or 3.9% in 2Q24 QTD (May: 20.7 pts /1.3%; YTD: +142 pts/9.8%), KLCI may consolidate its gains (resistance: 1,616-1,630-1,650 levels) further as investors digest the recently concluded May results season and Fed’s rate-cut uncertainty. Nevertheless, downside risk is likely to be cushioned at 1,565-1,580 zones, boosted by a less volatile RM, clearer policy frameworks in attracting higher value-added FDIs 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.