Market Review

• Tracking weak performance in global stock markets, KLCI continued to fall by 3.66 pts or 0.22% to 1626.11 on Tuesday as global sentiment was jittery ahead of FOMC meeting this week; BREXIT referendum on 23 June; correction in oil prices; and weakening Ringgit.

• On the external front, Dow declined for a fourth session in a row overnight, marking its longest losing streak since the market’s low i n F ebruary. Dow was down 57.66 pts or 0.33% to 17674.82, weighed by a correction in oil prices while investors were looking ahead to the decision of Fed meeting and BREXIT referendum on 23 June.

Technical Insights

• In the midst of correction

• Based on weekly chart, the trend of KLCI continues to undergo a correction phase (see FIG4). It formed an inverted Hammer last week, suggesting that any rally would be capped. The local benchmark index is likely to find strong supports near 1614.14 and the psychological level of 1600 before it could hit 1580-1575 territories.

• Based on daily chart, although yesterday’s Hammer could be considered as a reversal candlestick pattern (see FIG3), the likelihood of technical rebound is not convincing as reading from MACD, RSI and Stochastics is not oversold and still hooking down.

Market Strategy

• Albeit yesterday’s Hammer candlestick indicating t he likelihood of technical rebound, we are of the view that the rebound is not convincing, amid still falling oscillators; correction in oil prices; weakening Ringgit; decline in US stocks; jittery ahead of FOMC meeting this week; as well as uncertainty surrounding the looming BREXIT referendum on 23 June.

• Today we recommend a Trading BUY on an exportoriented stock, SUPERMX, which may gain buying momentum amid strengthening USD against Ringgit . (see our separate report)

Source: Hong Leong Investment Bank Research - 15 Jun 2016