Market Review

• KLCI declined 13.06 pts or 0.8% to end Thursday at 1614.9 yesterday, in tandem with gloomy global stock markets after the Bank of Japan kept its monetary policies unchanged and as investors turned their attention to next week's "Brexit" vote. Market sentiment was also dampened by correction in oil prices.

• On the external front, US stocks erased early losses to close modestly higher overnight, ending a five-day streak of losses. Dow rebounded by 92.93 pts or 0.53% to 17733.10 on Thursday after Fed’s decision to postpone rate hike.

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, KLCI staged a mild rebound in the morning session yesterday before selling pressure taking the lead, triggering a long black Marubozu candlestick (see FIG3). Noticeably, reading from MACD, RSI and Stochastics showed that market sentiment is bearish.

Market Strategy

• We are of the opinion that the local key benchmark index is expected to fall lower today on further selldown in oil prices overnight while investors remain cautious over the uncertainty surrounding the looming BREXIT referendum on 23 June.

• Technical speaking, the trend of KLCI continues to undergo a correction phase. 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.

Source: Hong Leong Investment Bank Research - 17 Jun 2016