Poised to revisit YTD high at 1,632 amid global policy easing optimism and positive technicals

KLCI: 1614.73 (6.2)
DOW: 38886.17 (78.8)
MSCI Asia: 180.15 (1.6)
FCPO (RM): 4026 (66)
BRENT (USD): 79.87 (1.46)
USDMYR: 4.695 (-0.003)
SGDMYR: 3.4851 (-0.001)
EURMYR: 5.1082 (0)
AUDMYR: 3.1222 (-0.001)
GBPMYR: 6.0024 (0)
US: 10-yr yield (%) 4.287 (0.011)
BNM:10-yr yield (%) 3.875 (0.011)

Asia/US. In line with record highs on the S&P 500 and NASDAQ, driven by AI-related stocks, Asian markets closed mostly higher. This trend was supported by declining bond yields due to subdued jobs and manufacturing data in the US and increased optimism over global policy easing after a rate cut by the BOC (5 June) and anticipation that the ECB may follow suit on 6 June. On the eve of the May non-farm payrolls that will help shape the outlook for the Fed’s future policy path, Dow jumped 79 pts to 38,886 after initial jobless claims rose more than expected last week. Meanwhile, recent rate cuts by the BOC and ECB are likely to add pressure on the Fed to review its restrictive policy at the FOMC meeting on 12 June. 

Malaysia. Mirroring higher Wall St and regional markets, KLCI rose 6.2 pts to 1,614.7, supported by a 25% spike in trading volume at 5.35bn shares valued at RM4.5bn while market breadth improved to 1.62 vs 1.23 a day ago. Foreigners regained their buying mode (+RM164m, June: +RM349m, YTD: -RM417m) while local retailers (-RM114m, June: -RM14m, YTD: -RM3.29bn) and local institutions (-RM50m, June: -RM201m, YTD: +RM3.7bn) emerged as major net sellers. 

Outlook Technically, KLCI is poised to revisit YTD high of 1,632 in the short term, buoyed by (i) encouraging 1Q24 results and positive technical readings, (ii) rising bets for global policy easing, (iii) a less volatile RM, (iv) policy tailwinds amid clearer policy frameworks in attracting higher value-added FDIs along with trends such as China + 1, and (v) political stability to expedite economic and fiscal reforms to foster long-term growth and competitiveness. Nevertheless, we expect formidable resistance near 1,650-1,675 zones after rallying 78.7 pts/+5.1% in 2QTD and 160.1 pts/11% YTD, in conjunction with the traditional lull period in June for KLCI (average 10Y/20Y: -1.2%/-0.3%).

Source: Hong Leong Investment Bank Research - 7 Jun 2024