Market review

• Asian stock markets traded higher prior to the release of Fed’s January meeting minutes as buying interest picked up following the bullish tone in the overnight Wall Street. The Shanghai Composite Index and Hang Seng Index increased 0.24% and 0.99% respectively, while Nikkei 225 ended flattish.

• Mixed tone persisted for another day on the local bourse as upside on the FBM KLCI were capped by profit taking activities among selected index heavyweights like RHBBANK (-3.7%) and SIME (-0.4%). Nevertheless, the key index managed to eke out a marginal gain at 1,708.08 pts (+0.09%). Market volumes continued to stay healthy above the 2.00bn mark at 2.69bn shares. Also, on the broader market, there were 474 advancers, 389 decliners and 389 traded unchanged.

• Wall Street traded mixed after the Fed's minutes was released indicating a sooner-than-expected increase in interest rates could be seen if US economy shows a healthy growth. The Dow inched up 0.16%, recording the ninth winning sessions, while S&P500 and Nasdaq slipped 0.11% and 0.09% respectively. Meanwhile, dollar index fell to 101.22 pts (-0.15 pts).

Technical view

Smaller candle since selling interest started two days ago – investors’ tone still cautious

• Trading range narrowed on the FBM KLCI as investors stayed cautious ahead of the Fed’s minutes. The MACD Line crossed below Signal Line – indicating that the momentum is weakening. Also, the Stochastics oscillator remains overbought. KLCI’s resistance will be envisaged around 1,720-1,730, while the support is located at 1,700.

Market outlook

• As the stock markets digested the Fed's minutes without any huge volatile movements, we reiterate that the Dow may extend its upward trend towards the resistance of 20,800-21,000 after a short consolidation, while the trailing support will be set around 20,470.

• Meanwhile, shares on Bursa Malaysia could be due for slight pullback as the FBM KLCI has rallied from the 1,620 level two months back. Also, both the stochastics and RSI indicators are suggesting an overbought position on the key index. As the Brent crude oil flirted the US$57 level two days ago, we anticipate that a solid breakout above US$58 will spike further interest towards O&G counters over the near term.

• Closed position: We took profit on MASTEEL at RM0.90 (2.9% gain) after hitting R1 upside target yesterday.

Source: Hong Leong Investment Bank Research - 23 Feb 2017