KLCI to trend sideways while situational plays continue to shine

KLCI: 1610.17 (1.2)
DOW: 38647.1 (-65.1)
MSCI Asia: 179.78 (0)
FCPO (RM): 3942 (6)
BRENT (USD): 82.75 (0.15)
USDMYR: 4.709 (-0.008)
SGDMYR: 3.4904 (0.002)
EURMYR: 5.0869 (0.015)
AUDMYR: 3.1328 (0.013)
GBPMYR: 6.0198 (0.002)
US: 10-yr yield (%) 4.2442 (-0.072)
BNM:10-yr yield (%) 3.846 (-0.012)

Asia/US. Tracking record highs from the S&P 500 and Nasdaq, Asian markets jumped in early trades amid AI-fuelled rally in technology stocks and cooling US CPI data, although mostly ended mixed following a hawkish 2024’s outlook for interest rate cuts to just one time (vs 3 guided in Mar). Dow slipped 65 pts to 38,647 while the S&P 500 (+12 pts to 5,433) and Nasdaq (+57 pts to 17,666) ended at another fresh records amid falling US10Y bond yield (-7 bps to 4.24%), taking cues from moderating May PPI and rising weekly jobless claims (a 10M high), reviving hopes for an imminent interest rate cut. 

Malaysia. Mirroring the cautious regional markets, KLCI gained 1.2 pts to 1,610.2 after soaring as much as 7.9 pts. Trading volume tumbled 22% to 5.9bn shares valued at RM4.3bn (-17% DoD) while market breadth rebounded to 1.79 vs 0.73 previously. Foreigners became the major net buyers (+RM197m, June: +RM795m, YTD: +RM29m) whilst local institutions (-RM91m, June: -RM310m, YTD: +RM3.56bn) and local retailers (-RM106m, June: -RM455m, YTD: -RM3.60bn) emerged as major net sellers. 

Outlook KLCI may continue to trend sideways as investors weigh the diesel subsidy rationalisation plan and Fed’s rate-cut projection, before revisiting 1,632 (YTD high), buoyed by (i) a less volatile RM; (ii) policy tailwinds amid clearer policy frameworks in attracting higher value-added FDIs along with trends such as China + 1; (iii) political stability to expedite economic and fiscal reforms to foster long-term growth and competitiveness; and (iv) continued foreign net inflows. After rallying 155 pts YTD, we still expect the benchmark to face formidable resistance near 1,650-1,660-1,675 zones, in conjunction with the traditional lull period in June for KLCI (average 10Y/20Y: -1.2%/-0.3%).

VIRTUAL PORTFOLIO We took profit on INFOTEC (12.1% return) after hitting our LT upside target.