Ripe for a technical rebound

KLCI: 1589.66 (-0.7)
DOW: 39411.21 (260.9)
MSCI Asia: 178.94 (-0.3)
FCPO (RM): 3894 (-4)
BRENT (USD): 86.01 (0.77)
USDMYR: 4.713 (0)
SGDMYR: 3.4827 (0.003)
EURMYR: 5.0532 (0.012)
AUDMYR: 3.1344 (-0.001)
GBPMYR: 5.9707 (0.008)
US: 10-yr yield (%) 4.2321 (-0.023)
BNM:10-yr yield (%) 3.866 (0.015)

Asia/US. Asian markets ended mixed as sentiment was dampened by the prospect of a trade war between China and the EU following imposition of steep tariffs on imports of China’s EVs. Additionally, anticipation of the US June inflation data kept investors on edge. The S&P 500 (-17 pts to 5,448) and Nasdaq (-188 pts to 17,500) moderated from recent record highs as AI-related tech mega caps retreated while the Dow soared 260 pts to 39,411 as investors snapped up energy and bank stocks. This week, major spotlight is the May core PCE data (28 June), together with housing-market data, durable goods orders and speeches by several Federal Reserve officials to assess the health of the US economy and monetary policy outlook.

Malaysia. KLCI continued its profit taking consolidation (-0.7 pts to 1,589.6) for a 6th straight session. Turnover slid 14% to 5bn shares valued at RM3.8bn (-38% DoD) with 914 losers outpacing 302 winners. Foreigners were the major net sellers (-RM164m, June: RM131m, YTD: -RM635m) whilst local retailers (+RM85m, June: -RM165m, YTD: -RM3.3bn) and local institutions (+RM79m, June: +RM34m, YTD: +RM3.94bn) emerged as major net buyers.  

Outlook KLCI could extend its consolidation (+135 pts YTD and 53.4 pts 2QTD) amid negative technical readings as investors continue to recalibrate the impact of diesel subsidy rationalisation plan, Fed’s 2H rate-cut trajectory coupled with a resumption of foreign selling. Nevertheless, we remain cautiously optimistic that after a brief consolidation, KLCI will revisit 1,600-1,632 levels, buoyed by (i) resilience in corporate earnings; (ii) proactive policies in attracting higher value-added FDIs; (iii) political stability to expedite economic and fiscal reforms to foster long-term growth and improve financial standing.

VIRTUAL PORTFOLIO (FIG1) We took profits on MNHLDG (8.1% return) and NOTION (14.9% return) amid weakening market sentiment.
 

Source: Hong Leong Investment Bank Research - 25 Jun 2024