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HLBank Research Highlights

Author: HLInvest   |   Latest post: Thu, 18 Jul 2019, 9:15 AM

 

Traders Brief - Investors to Stay Defensive Over the Near Term

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MARKET REVIEW

With the softer-than-expected China’s industrial output data in May (released last Friday) slowing to more than 17-year low, Asia’s equities ended on a flattish tone as investors were trading on an indecisive tone ahead of the FOMC meeting. The Hang Seng Index and Shanghai Composite Index rose 0.4% and 0.2%, respectively, while Nikkei 225 ended flat.

Similarly, KLCI was stuck within a narrow range and ended marginally lower by 0.01% to 1,638.40 pts. Stocks on the local front were traded on a lacklustre tone as overall traded volume was lower at 1.62bn, worth RM1.43bn as compared to 1.75bn, valued at RM1.67bn on last Friday. Meanwhile, market breadth was negative with the decliners outpacing gainers by a ratio of more than 2-to-1. Nevertheless, selected export-oriented stock such as Karex traded actively higher yesterday.

Wall Street ended flattish for the session ahead of the FOMC meeting as traders will be watching closely on the outcome of the meeting. Investors’ expectations for any policy changes are low at this juncture, but investors will look for clues or signals in the minutes on any potential rate cuts in July and later this year. The Dow and S&P500 rose 0.09%, respectively, while Nasdaq added 0.52%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI continues its retracement phase and the MACD indicator is turning lower, suggesting that the momentum is also weaker at this juncture. Meanwhile, both the RSI and Stochastic oscillators are trending lower after hitting the overbought region last week. Based on the technical readings, we expect the KLCI to lock in a range bound between 1,630-1,658 over the near term.

On the local front, we expect the sentiment to remain soft as investors may extend the defensive stance at this moment ahead of the FOMC meeting. Also, without any fresh leads on the US-China trade progress, we believe the traders may stay side-lines until end of the month to understand any significant progress on the trade war status during the G20 summit. Nevertheless, traders may lookout for export-oriented stocks for a short term trading opportunity as the USDMYR is hovering near the RM4.17/USD.

TECHNICAL OUTLOOK: DOW JONES

The Dow is hovering sideways within a narrow range, but still is positive bias. The MACD has started to cross above zero level last week. However, the stochastic is slightly overbought. We expect the Dow to remain sideways for the near term. Resistance will be set around 26,500, while support will be located around 26,000, followed by 25,500.

In the US, market participants are likely to remain side-lines and deploying a defensive approach this week on the FOMC meeting and G20 summit, watching out for any signals related to the interest rate outlook (in theory, lower rates would boost economic growth) moving forward and the trade progress between US-China respectively. The trading range of the Dow is likely to be located around 25,500-26,500.

 

Source: Hong Leong Investment Bank Research - 18 Jun 2019

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