Market review

• Asian equities ended on a mixed note as U.K. officially triggered Article 50 for Brexit and investors were cautious ahead of the negotiation details. The Nikkei 225 and Hang Seng Index added 0.08% and 0.19%, but Shanghai Composite Index slipped 0.36%.

• The FBM KLCI gapped up towards 1,760 but selling pressure emerged on Petronas Dagangan and British American Tobacco – the latter declined after a potential cigarette price hike statement from Deputy Health Minister. However, on the broader market, market breadth remained positive with advancers ahead of decliners.

• US equities ended mostly higher on the back of buying support in energy shares amid further rebound in crude oil price, coupled with stronger lending home sales data. The S&P500 and Nasdaq added 0.38% and 0.02% respectively, but the Dow declined 0.20%.

Technical view

Revisited 1,760 with overbought signal

• After the FBM KLCI traded near the 1,760 level, selling pressure set in and the FBM KLCI formed a bearish engulfing candle. The MACD Histogram turned red, while the Stochastics is hovering in the overbought zone. Resistance will be envisaged at around 1,760, while support will be located around 1,740.

Market outlook

• Overseas markets digested fairly well after the Theresa May triggered the Article 50 and Brexit talk started. Hence, we opine that the near term catalyst would depend on the recovery pace of crude oil prices and U.S. earnings season, which will be starting in April.

• Meanwhile, on our local bourse, we believe market is overbought at this juncture on the FBM KLCI, hence upside could be capped around 1,760. Nevertheless, small caps and lower liners within the O&G segment may benefit from stronger overnight crude oil prices, which Brent oil recovered above US$50 and may retest US$54 over the near term.

• Closed positions. Yesterday, we took profit on MAYBULK (12.3% gain) after hitting R2 upside target in two days. We also squared off CRESBLD (2.1% loss) amid weakening technicals.

Source: Hong Leong Investment Bank Research - 30 Mar 2017