Summary

• Wall Street may trend positively with the stronger earnings from the AI theme, coupled with the Fed heading for at least 3 interest rate cuts this year, while Bursa exchange should head into a firmer environment based on seasonality analysis.

• With stable recovery seen across the board, we opine there will be opportunities within the commodity sectors like O&G and Plantation.

• Meanwhile, we believe the ongoing recovery theme would bode well for Technology, Consumer, Banking, and Automotive.

• Besides, with more vibrant activities in the mega infrastructure space, it should be beneficial for Construction, Building Materials and Property.

Seasonality Analysis

• March is seasonally weak… Based on the heat map for FBMKLCI (Fig #1) and FBM Small Cap (Fig #2) since 2001, we noticed that March is a seasonally weaker month, having -0.4% and -1.0% losses, respectively.

• …heading into high season for 2Q24. We think the market heading into a high season into 2Q24, based on the seasonality analysis. With this, we anticipate a more vibrant trading environment on the local front, in line with the positive trading tone in the US following the dovish tone from the Fed.

US Economic Review and Outlook

• Inflation data (Fig #3) is crucial economic data points that the Fed monitors. From the peak in 2022, Consumer Price Index (CPI), Producer Price Index (PPI) and Personal Consumption Expenditures (PCE) have been declining; however there are some spikes in the recent months. Nevertheless, we believe it is stabilizing and shouldn’t warrant any hawkish tone from the Fed at least for the near term.

• US economy grew at a softer pace against 3Q23. In 4Q23, the US GDP (Fig #4) is still expanding but at a moderate pace of 3.4% QoQ (vs. prior estimates of 3.2%), supported by healthy consumer spending (rose 3% vs. estimates of 2.8%).

Source: Mplus Research - 1 Apr 2024