Market review

• Despite a harmonious meeting between Trump-Xi summit last week, Asian bourses ended mixed amid a sense of unease lingered across markets. Investors are weighing looming security risks in Syria with strained U.S.-Russian relations, upcoming US 1Q17 reporting season starting this week and the 1st round of French presidential election on 23 Apr. Sentiment was also dented by heightened geopolitical tension in Korean Peninsula following the dispatch of a U.S. aircraft carrier following North Korea's multiple nuclear missile test launches.

• Tracking cautious regional markets, KLCI lost 2.2 pts to 1,739.5 after traded within a range of 5 pts between an intra day high of 1,741.7 and a low of 1,736.7, dragged down by KLK (-22sen to RM24.46), GENTING (-13sen to RM9.27) and PETDAG (-10sen to RM24.00). Trading volume decreased to 3.66bn shares worth RM2.10bn as compared to Friday’s 5.22bn shares worth RM3.39bn. Market breadth was negative with 430 gainers as compared to 468 losers.

• The Dow inched up by 1.9 pts to 20,658 after fluctuated within +94 pts and -44 pts, as strength in energy shares (following a 1.6% gain in WTI amid concern of disruption in supplies) helped to offset selling pressure sparked by geopolitical concerns in Middle East and Korean Peninsula and ahead of the 1Q17 earnings season. Overall, the S&P 500 companies are scheduled to start releasing their quarterly results in earnest this week with 1Q17 earnings estimates to rise as much as 12%, the highest growth since the 3Q11.

Technical view

Immediate support near 30-d SMA to prevent further slide towards 1719-1726

• Near term KLCI outlook has turned mildly negative following a breakdown below support trendline amid tapering MACD and RSI indicators. A decisive fall below 1,733 (or 30-d SMA) would suggest a corrective move towards 1,719 (50-d SAM) and 1,705 (38.2% FR) levels. Meanwhile, stiff resistances are situated at 1745 (10-d SMA) and 1759 (YTD high).

Market outlook

• In the near term, the Dow may lock in a range bound consolidation mode within 20,400 to 21,000 as investors refocus on the 1Q17 earnings reporting season and geopolitical issues, in addition to earlier dampeners like possibilities of Fed scaling back its quantitative easing and slow kick-off in the US fiscal spending and tax reforms.

• In tandem with the cautious mode overseas, shares on the local front could trap in range bound consolidation pattern within 1725-1760 zones. Also, given the recovering Brent crude oil prices above US$54, we may anticipate trading interest to pick up within oil and gas this week.

Source: Hong Leong Investment Bank Research - 11 Apr 2017