Market review

• Shares on Asian stock markets turned into selling mode as traders continued to focus on President Trump and Chinese President Xi Jinping, which trade discussion will be the spotlight of the summit. Nikkei 225 declined 1.40% amid stronger yen, while Hang Seng Index fell 0.52%.

• Similarly, trading sentiments on the local bourse were negative as the FBM KLCI tripped marginally below the 1,740 level at 1,739.56 pts (-0.29%) led by CIMB and AXIATA. FBM Small Cap also suffered with the emergence of selling pressure. Market breadth has turned negative with 526 losers, 452 gainers, while 338 traded unchanged. Overall market volumes stood at 3.86bn, worth RM3.00bn.

• Wall Street ended slightly higher after a volatile move on the previous day on the back of better-than-expected US initial jobless claims, coupled with stabilizing crude oil prices.

Technical view

MACD indicator still indicate on-going consolidation phase

• The MACD Line is hovering below Signal Line, while the MACD Histogram has extended another negative bar – indicating that the momentum is weakening. Also, Stochastics has tripped below 50.

Market outlook

• We believed that market sentiments will still be cautious over the near term with the on-going Trump-Xi summit. Hence, the Dow's trading range is likely to trend between 20,500-20,800.

• Meanwhile, shares on the local bourse could extend its profit taking activities after KLCI violating below 1,740, while small cap index took a pause near the 17,500 level. Nevertheless, oil and gas stocks could gain trading interest as Brent crude oil price stabilized above US$54.

• Trading Idea – DSONIC. In March, DSONIC has secured additional RM79.7m contract to their current RM284.7m 5-year supply of polycarbonate datapage and personalization services to the immigration department, which boosted the total contract value to RM364.4m. Also, it received an order of 1 million units each for the MyKad and MyKad consumables in previous quarter. Price experienced an inverted head and shoulders pattern breakout above RM1.30. Target will be envisaged around towards RM1.36-RM1.40, followed by LT target of RM1.48. Support is around RM1.23-1.25, with cut loss set at RM1.20.

Source: Hong Leong Investment Bank Research - 7 Apr 2017