To break 1,632 resistance amid the return of foreigners and Fed’s rate cut optimism

KLCI: 1623.12 (4.7)
DOW: 39753.75 (32.4)
MSCI Asia: 188.51 (3.3)
FCPO (RM): 3957 (22)
BRENT (USD): 85.4 (0.32)
USDMYR: 4.6875 (-0.012)
SGDMYR: 3.4789 (-0.004)
EURMYR: 5.0846 (0)
AUDMYR: 3.1681 (0.001)
GBPMYR: 6.0359 (0.016)
US: 10-yr yield (%) 4.2101 (-0.074)
BNM:10-yr yield (%) 3.851 (0.006)

Asia/US. Tracking bullish Wall St, Asian markets rose as bets on a Sep rate cut surged following Powell’s dovish comments. Meanwhile, all eyes are turning to the start of China's 3rd Plenum gathering on 15 July, where top officials are expected to discuss ways to kickstart its ailing economy amid ongoing property crisis and geopolitical issues. Dow gained 32 pts to 39,753 while Nasdaq (-1.9% to 18,288) and S&P 500 (-0.9% to 5,584) retreated from their record highs. Stock rotation hit mega caps on bets Fed may cut rates as early as Sep (US10Y yield: -0.07% at 4.21%) after June inflation rates fell more than expected to 1Y low at 3% (May: 3.3%, forecast: 3.1%). On corporates, DAL fell on 2Q earnings miss while PEP ended flat as it guided weak US demand from “price-conscious” consumer". Major US earnings reports in focus today are C, JPM and WFC.

Malaysia. KLCI climbed for a 3rd day (+4.7 pts to 1,623.1) as investors weighed positive news flows that PMX’s visits abroad have generated potential investments amounting to RM431bn from 2023 until May 2024 coupled with an upgrade by JPM on Malaysia's rating from “underweight” to “neutral” after almost six years. Market breadth was positive at 1.59 vs 1.04 previously while daily volume jumped 13.2% to 5.39bn shares valued at RM4.41bn. For the 9th straight day, foreigners were the major net buyers (+RM389m, July: +RM871m, YTD: +RM43) while local institutions (-RM310m, July: -RM244m, YTD: +RM3.97bn) and local retailers (-RM79m, July: -RM627m, YTD: -RM4.01bn) emerged as major net sellers. 

Outlook In wake of the Sep’s US rate-cut optimism, the return of foreign investors (crediting the country's policy reforms, rising FDIs and infrastructure build-up), coupled with exuberance in investment themes surrounding tourism recovery, energy transition, Johor’s reinvigoration, disposable income boosters, and trade diversion/China+1 strategy, KLCI may break the 3Y high of 1,632 before heading towards 1,650-1,660 levels. 

Source: Hong Leong Investment Bank Research - 12 Jul 2024