Asian markets fell as investors navigated a confluence of escalating US–Iran tensions, persistent inflation concerns, and a healthy correction in AI-linked stocks. Despite geopolitical escalation, sentiment found some support in the lack of major supply disruptions, with Brent crude holding below the US$100/bbl mark and off its US$126 peak during the earlier conflict phase. Focus now shifts to upcoming US CPI & PPI data, a key catalyst that could recalibrate Fed expectations and steer near-term policy direction.
Wall St slumped (Dow -1.87%, S&P 500 -1.62%, Nasdaq -1.98%) as risk aversion intensified after signalled that negotiations with Iran were taking “too long” and threatened more military actions. Technology and semiconductor stocks led the decline, extending a recent correction amid stretched AI-driven valuations and positioning ahead of the highly anticipated SpaceX listing on 12 June. On data, headline CPI accelerated to 4.2% YoY (highest in three years) while core CPI rose a softer-than-expected 0.2% MoM, suggesting underlying price pressures may be moderating.
The KLCI inched up 0.21% to 1,679 after a 5.4% pullback from its YTD high at 1,771, as investors rotated into defensive domestic names. Gains were led by MAYBANK, PCHEM, PBBANK, TENAGA, KLK, IOICORP and SUNMED, supported by Malaysia’s relative safe-haven appeal as a net energy exporter and optimism over the launch of MYVU programme.
Foreign funds stayed firmly risk-off, extending their selling streak to 19 sessions (RM5.38bn), with net outflows of RM134m (5-day: -RM1.13bn; June MTD: -RM1.59bn) alongside local retailers (-RM18m; 5-day: +RM265m; June MTD: +RM397m). In contrast, local institutions (+RM152m; 5-day: +RM869m; June MTD: +RM1.19bn) remained as the key stabiliser.
HLIB’s research note sees the KLCI remaining in an extended corrective phase after forming a Double Top, breaking below key MAs (20/50/100/200-day) and its uptrend line (~1,720). Immediate support sits at 1,669 (200-day MA), with a decisive break could accelerate downside towards 1,650, 1,625 (38.2% FR) and 1,600. Upside remains capped unless the index reclaim 1,700–1,720 successfully, which would signal trend reversal and open the path towards 1,732 (10% FR) and 1,750.
Tracking Wall Street’s overnight slump on renewed US strikes against Iran and the prolonged closure of the Strait of Hormuz, the KLCI is expected to remain under pressure, with key support at 1,650–1,669, amid sustained foreign outflows and heightened risk aversion. Sentiment remains pressured by potential spillovers to Malaysia’s GDP and corporate earnings, despite its net energy exporter status.
Domestically, political risk premiums are edging higher despite PM’s assurances against a near-term GE16. Preparations for snap polls in Johor and Negeri Sembilan, alongside lingering noises of an early general election (due Feb 2028), continue to cloud the outlook and raise broader stability concerns.
