Market review

• The MSCI Asia Pacific Index climbed 0.2% to 134.78, led by a 1.7% rally in Nikkei 225 following news that the government is preparing a stimulus package worth more than Y28 trillion (consensus Y10-20 trillion). However, most markets remained cautious as investors awaiting Fed and BOJ policy meetings’ decision.

• Tracking mildly higher regional markets, KLCI inched up 2.1 pts to 1663.6 after traded within a range of 5.5 pts between an intra-day high of 1664.8 and a low of 1659.2. Market breadth was positive with 430 gainers as compared to 343 losers, supported by higher daily volume of 1.75m shares (+25%) worth RM1.71bn (+9.6%).

• The Dow slid as much as 43 pts on profit taking, as sentiment was weighed down by sliding oil prices and slower-than-expected earnings from McDonald. Travellers and Coca-Cola. However, better-than-expected results from Appl e and Fed’s positi ve outlook on the US economy (with no strong signals of tightening bias) reduced the losses to only at 1.6-pt.

Technical Insights

• Listless trade as index hovers near 200-d SMA

• We reiterate our view that as long as KLCI is unable to close decisively above the 1667 (200-d SMA) levels, extended sideways consolidation is expected. Key resistance levels are 1670 (50% FR) and 1684 (61.8%), followed by 1700 psychological barrier.

• On the flip side, a decisive fall below 1656 (mid Bollinger band) will trigger further ret racement to lower supports at 1640 (23.6% FR) zone.

Market Strategy

• Bursa Malaysia shoul d recei ve well on news of Fed’s positive view on the US economy (with no st rong signals of tightening bias) and higher -than-expected stimulus package by Japan’s government. Sentiment will also be boosted by hopes of more stimulus measures by Malaysian government as well as policy easing by BNM to stimulate slowing economy.

• However, the ongoing oil price consolidation, the revival of 1MDB concern coupled with expectations of another lackluster Aug reporting season may cap strong upside ahead.

Source: Hong Leong Investment Bank Research - 28 Jul 2016