Cautious mode ahead of the FOMC decision

KLCI: 1614.37 (-3.5)
DOW: 38868.04 (69.1)
MSCI Asia: 180.22 (0.2)
FCPO (RM): 3926 (7)
BRENT (USD): 81.63 (2.01)
USDMYR: 4.723 (0.031)
SGDMYR: 3.4891 (0)
EURMYR: 5.0742 (-0.036)
AUDMYR: 3.1108 (-0.015)
GBPMYR: 5.9971 (-0.007)
US: 10-yr yield (%) 4.467 (0.033)
BNM:10-yr yield (%) 3.879 (0.007)

Asia/US. Ahead of the major FOMC decision on 13 June, Asian bourses ended mixed in languid trades (due to holidays in China, Hong Kong and Australia markets) as investors weighed a smaller contraction in Japan’s 1Q24 revised GDP coupled with Fed’s rate cuts uncertainty after an upbeat May jobs data.  The S&P 500 (+14 pts to 5,360) and the Nasdaq (+59 pts to 17.192) closed at fresh records while Dow gained 69 pts at 38,868 as investors geared up for the CPI (12 June), FOMC decision and economic projections (13 June), as well as the PPI (13 June) data. 

Malaysia. Tracking the edgy Wall St and regional markets, KLCI lost 3.5 pts to 1,614.4 as investors digested the diesel subsidy rationalisation plan and awaited the FOMC meeting decision. Trading volume rose 4% to 5.96bn shares valued at RM3.3bn while market breadth slid to 1.18 against 2.07 last Friday. In terms of fund flows, foreigners (+RM10m, June: +RM546m, YTD: -RM220m) and local institutions (+RM29m, June: -RM265m, YTD: +RM3.64bn) emerged as major buyers whilst local retailers (-RM39m, June: -RM281m, YTD: -RM3.42bn) emerged as major net sellers. 

Outlook KLCI may continue to trade in a cautious tone this week as investors weigh the diesel subsidy rationalisation plan (announced on 9 June) and upcoming FOMC decision, before revisiting its YTD high of 1,632 next, buoyed by (i) encouraging 1Q24 results and positive technical readings, (ii) a less volatile RM, (iii) policy tailwinds amid clearer policy frameworks in attracting higher value-added FDIs along with trends such as China + 1, and (iv) political stability to expedite economic and fiscal reforms to foster long-term growth and competitiveness. We expect formidable resistance near 1,650-1,675 zones after rallying 78.3 pts/+5.1% in 2QTD and 160 pts/11% YTD, in conjunction with the traditional lull period in June for KLCI (average 10Y/20Y: -1.2%/-0.3%).

VIRTUAL PORTFOLIO We took profits on KGW (19% return) and SINKUNG (20% return) yesterday after hitting our upside targets.