Market Review

• Taking cue from mixed performance on Asia equities, KLCI closed lower 2.77 pts or 0.17% to 1657.85, as weak Chinese trade data offset a bright energy sector outlook and an expected delay in interest rate hikes by the US Fed this month.

• On the external front, Dow continues to stage mild followthrough technical rebounds overnight by 66.77 pts or 0.37% to 18005.05, as the decline in US dollar lifted commodity-related stocks and boosted the outlook for multinationals.

Technical Insights

• Likely to stage follow-through rebounds

• Based on daily chart, KLCI formed a Doji candlestick, signifying equality and/or indecision between bulls and bears. Hence, we expect KLCI to trip between 1665 – 1650 zones at this juncture until further clari fication is reached.

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

Market Strategy

• Local benchmark key index is expected to test critical resistance level of 1665 today, given overnight followthrough rebounds in Dow; appreciation in Ringgit against USD; higher Brent crude oil price; and its bullish technical readings. A decisive breach above 1665 will drive key index higher towards 1670 – 1680 zones.

• Having said that, 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 yearend target due to lackluster local earnings result.

• Stock on radar for today: We recommend Trading BUY on HSL (Trading idea) today. (see our separate report)

Source: Hong Leong Investment Bank Research - 9 Jun 2016