Market Review

• KLCI was volatile and choppy last week, wavering between 1638.57 and 1622.25. This was within last week’s projected weekly tradi ng range of 1615 -1650. KLCI was down 0.73 pts or 0.04% wow, as traders were on 'wait and see' mode ahead of the ECB interest rate decision; US economic data, which may give some clues on likelihood of US interest rate hike and the beginning of fasting month.

• Tracking gains in most Asian equities last Friday, KLCI was up 5.93 pts or 0.36%, as investors braced for key US jobs data which offer some cues on a possible interest rate hike in June by the Fed.

• On external front, Dow ended last Friday lower by 31.50 pts or 0.18% to 17807.06, as investors weighed implications of a dismal jobs report on the Fed monetary policy decision in two weeks. The US economy created just 38,000 jobs last month, the weakest level of hi ring in more than five years.

Technical Insights

• Likely to stage a relief rebound amid bottomingout oscillators

• Based on weekly chart, the trend of KLCI is in the midst of experiencing a market correction (see FIG4). The local benchmark index is likely to enter into rangebound consolidation phase, fluctuating within a narrow range of 1640 – 1625, before it find strong supports near 1614.14 and the psychological level of 1600.

• However, on near-term wise, daily chart shows that KLCI is likely to stage a relief rally towards 1650 as buying momentum is picking up pace amid bottoming-up MACD, RSI and Stochastics oscillators.

Market Strategy

• The ugly US jobs data last week which may prompt Fed to delay interest rate hike this month is likely to see relief strength in Ringgit against USD. Coupled with bottomingup technical readings, the benchmark key index may also stage a relief rally towards 1650.

• Having said that, we are of the view that any relief rally will be capped as overall sentiment remains cautious ahead of FOMC meeting on 14-15 this month; uncertainty surrounding the looming BREXIT; higher expectation of lower market consensus for the KLCI year-end target due to lackluster local earnings result; as well as the beginning of fasting month.

• In response to Sendai's ar ticle appeared in STARBIZ Week on 4 June, today we highlight Sendai's technical perspective. Key supports are RM0.57-0.60 while resistances are situated at RM0.67-0.745.

Source: Hong Leong Investment Bank Research - 6 Jun 2016