HLBank Research Highlights

Author: HLInvest   |   Latest post: Wed, 23 Sep 2020, 10:10 AM


Traders Brief - Focus Remains in Small Caps

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Asia’s stock markets ended mixed after China released mixed bag of data (China’s industrial output fell to a 17-year low and retail sales were sluggish, but property investment was picking up). Also, the sentiment remained cautious as US lawmakers rejected the idea of leaving the EU without a Brexit deal in place. The Shanghai Composite Index declined 1.12%, but Hang Seng Index added 0.15%, while Nikkei 225 closed flat. Meanwhile, the FBM KLCI fell 0.22% to 1,674.52 pts amid profit taking activities amongst selected heavyweights. However, market breadth was positive with 491 gainers vs. 400 losers. Market traded volumes increased to 4.77bn, worth RM2.75bn as compared to 4.00bn, worth RM2.39bn on Tuesday. The oil and gas sector was the main focus yesterday.

Wall Street was traded mostly lower as profit taking activities emerged on the back of rising concerns over uncertain trade developments; the meeting in Florida between President Trump and President Xi could pushed back to earliest in April (initially was set in late March). The S&P500 and Nasdaq slipped 0.09% and 0.16%, respectively while the Dow (+0.03%). ended flat.


After the two-day technical rebound, the FBM KLCI has taken a pause after hitting the immediate resistance along 1,680. The MACD Line is hovering below zero, while both the RSI and Stochastic oscillators are suggesting that the key index is oversold. Hence, with the negative readings on most of the indicators, we believe that the key index could stay sideways between the 1,666-1,680 over the near term. Further support will be located around 1,650.

On the local front, we still believe that the small caps and lower liners are in focus as compared to heavyweights on the back of heavy trading volumes over the past few days. Also, the 5-day cumulative foreign trade flow is still negative (outflow of 666m), which may put pressure the heavyweights over the near term. Traders may look into O&G stocks on the back of firmer crude oil prices and severely oversold construction stocks for trading opportunities.


The Dow trended sideways after a bullish engulfing candle formed on Monday. The MACD Line is still hovering above zero, while the RSI has hooked above 50. Also, the Stochastic oscillator (below 50) is trending higher. With the mixed technical readings on most of the indicators, we opine that the Dow could trend sideways with a positive bias mode to retest the 26,000, followed by 26,343. Support will be pegged around 25,000-25,144 (SMA200).

In the US, it will be headlines-driven market for now as market participants will be focusing on trade developments between the US and China, especially the upcoming Trump-Kim summit that was expected to be held over the next two months. Should there be any negative surprises in the trade agreement, sentiment on the market could be dampen and is likely to end the recent strong recovery in major indexes on Wall Street.

Source: Hong Leong Investment Bank Research - 15 Mar 2019

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