Market Review

• Despite mixed performance on Asia markets, KLCI staged a rebound by 12.53 pts or 0.77% to 1648.99, as Ringgit strengthened to 4.0985 against USD after the disappointing US jobs data last week which may prompt Fed to delay interest rate hike this month.

• On external front, Dow staged a strong rebound overnight by 113.27 pts or 0.64% to 17920.33, as Federal Reserve chair Janet Yellen painted a relatively upbeat view of the US economy despite the weak May jobs report but also ticked off enough headwinds for Wall Street to conclude that an interest rate hike next week is off the table.

Technical Insights

• Likely to stage a relief rebound amid bottomingout oscillators

• Based on daily chart, KLCI is expected to gain further buying momentum, with a long white marubozu candlestick amid bullish MACD, RSI and Stochastics oscillators (see FIG3).

• Based on weekly chart, the trend of KLCI is in the midst of experiencing a market correction (see FIG4). However, recent bargain hunting might reverse the current circumstance should the key index could form a long white candlestick this week.

Market Strategy

• We expect KLCI to stage a follow-through technical rebound given strong overnight rally in Dow; appreciation in Ringgit against USD; gain in Brent crude oil price; and its bullish technical readings. Hence, we revise our weekly projected trading range to 1635 – 1665 territories.

• Having said that, market breath was still negative with losers outpacing gainers by 432 to 345 on Monday as overall sentiment remains cautious ahead of FOMC meeting on 14-15 this month; uncertainty surrounding the looming BREXIT; as well as higher expectation of lower market consensus for the KLCI year-end target due to lackluster local earnings result.

• Stock on radar for today: We recommend Trading BUY on FGV (Trading idea) today.

Source: Hong Leong Investment Bank Research - 7 Jun 2016