Cautious mode with support at 1,595-1,600

KLCI: 1606.1 (-1.2)
DOW: 38835 (57)
FCPO (RM): 3883 (-63)
BRENT (USD): 85.4 (1.1)
USDMYR: 4.7133 (-0.01)
SGDMYR: 3.4811 (-0.01)
EURMYR: 5.0524 (0.01)
AUDMYR: 3.1188 (0.00)
GBPMYR: 5.9785 (-0.02)
US: 10-yr yield (%) 4.22 (-0.06)
BNM:10-yr yield (%) 3.88 (0.02)

Asia/US. Tracking record highs on the S&P 500 and Nasdaq, Asian markets ended mostly higher before paring the gains as investors weighed (i) BOJ Governor’s potential rate hike remark in July; (ii) China’s mixed economic data and weak housing market, and (iii) upcoming key economic indicators (eg retail sales, PMIs, housing starts) and Fed official speeches. Leading up to the Juneteenth holiday (19 June), Dow rose 57 pts to 38,835 while the S&P 500 (+14 pts to 5,487) and Nasdaq (+3 pts to 17,860) notched another new records, buoyed by AI-related stocks. Wall Street waded through mixed economic data that showed US industrial production increased while retail sales data was softer-than-expected. Meanwhile, a chorus of Fed officials emphasized the need for more evidence of cooling inflation before lowering rates. 

Malaysia. Despite higher Wall St and regional markets, KLCI lost 1.2 pts at 1,606.1 after rising as much as +7.8 pts, led by profit taking pullback on YTL, YTLPOWR, CIMB, PCHEM and PBBANK. Trading volume was 5.9bn (-5% DoD) shares valued at RM4.1bn (-5.9% DoD) while market breadth was negative for a 2nd session at 0.63 vs 0.83 last Friday. Foreigners were the major net sellers (-RM80m, June: +RM657m) whilst local institutions (+RM57m, June: -RM262m) and local retailers (+RM23m, June: -RM395m) emerged as major net buyers. 

Outlook KLCI may continue to trade in range bound mode as investors assess the impact of diesel subsidy rationalisation exercise and Fed’s 2024 rate-cut trajectory, before revisiting 1,632 (YTD high), buoyed by (i) resilience in corporate earnings and 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 improve financial standing. Nevertheless, after rallying 152 pts YTD, we still expect the benchmark to face formidable resistance near 1,650-1,660 zones, in conjunction with the traditional lull period in June for KLCI (average 10Y/20Y: -1.2%/-0.3%).

Source: Hong Leong Investment Bank Research - 19 Jun 2024