Market review

• Despite the geopolitical tension in the region of Korea, Asian equities were mostly positive, tracking the positive sentiment in the overseas market; Nikkei 225 added 0.27%, while Shanghai Composite Index and Hang Seng Index advanced 1.48% and 0.57% respectively.

• Meanwhile, the FBM KLCI continued to trade within a narrow range of 1,741-1,747 and ended at 1,744.67 pts (-0.14%) as investors stayed sidelines prior to the US China meeting. However, market breadth was positive with 612 advancers, 353 decliners, while 350 traded unchanged. Market volumes stood at 4.44bn, worth RM3.49bn.

• US equities started on a positive note amid better-than expected private jobs data, but sentiments changed throughout the session and pared down triple digit gains on the Dow and ended in the red territory as investors digested Fed's minutes with a negative mood amid potential trimming its balance sheet of US$4.5 trillion this year as economic activities are turning slightly positive.

Technical view

Weaker reading on MACD and Stochastics

• The MACD indicator has turned weaker on both the MACD Line and Histogram. Also, the Stochastics oscillator continued to trend towards 50 - indicating market may trend on a weaker mode. Support may be seen around 1,730.

Market outlook

• With the reversing tone on the Dow around the 20,700- 20,800 levels, we opine that the stock markets are potentially pricing in the negative impact moving forward from the Fed's statements. Meanwhile, should there be any further correction below 20,500, we expect next support to be located around 20,000.

• Negative sentiments from the overseas markets might spillover towards the local bourse and the FBM KLCI could pullback over the near term. Meanwhile, trading focus may still located within the small cap segments. Nevertheless, profit taking activities could emerge if the FBM Small Cap index trend towards the psychological level of 18,000.

Source: Hong Leong Investment Bank Research - 6 Apr 2017