Market review

• Most Asian markets ended mixed while safe havens continued to shine as escalating geopolitical landscapes in Syria and North Korea sparked risk-off mode. However, selling pressures moderated after President Xi told Trump that talks were the only way to ease concerns over North Korea.

• Tracking the rebounds in the Hang Seng and most of ASEAN bourses, KLCI jumped 8.2 pts with last minute spike at 1,744.1, led by PETCHEM (+17 sen to RM7.80), AXIATA (+11 sen to RM5.19), GENTING (+19 sen to RM9.51), MISC (+11 sen to RM7.43) and GENM (+6 sen to RM15.55). Despite the gains, market breadth was negative with 427 gainers as compared to 506 losers.

• Ahead of the start of US 1Q17 reporting season, safe havens continued its limelight while the Dow slid 59 pts to 20,592, given cautiousness over ratcheting geopolitical risks as U.S. Secretary of State Rex Tillerson met with the Russian counterpart Sergei Lavrov to discuss the civil war in Syria and nuclear capabilities of North Korea. The Dollar index also declined after President Trump told Wall St Journal that the US$ was getting too strong.

Technical view

Garners some support near 30-d SMA

• Despite yesterday’s 0.47% gain, KLCI near term outlook remains mixed unless it can swiftly regain its composure above the support trend line near 1747. Failure to do so will witness the index remaining in consolidation mode. A strong close above 1747 will spur KLCI to retest 1750-1759 levels. On the contrary, a fall below 1,736 (or 30-d SMA) again would suggest a corrective move towards 1,721 (50-d SAM) and 1,705 (38.2% FR) levels.

Market outlook

• 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 such as the Fed scaling back its quantitative easing and slow kick-off in the US fiscal spending and tax reforms.

• Tracking the external jitters and lack of fresh impetus, KLCI is envisaged to remain in consolidation mode unless swiftly reclaim above the uptrend line support near 1,747. Although volatility remains, firmer Ringgit (vs US$) and oil prices will help to cushion any heavy selldown.

• Trading idea - KTC. The group is engaged in the distribution of 3rd party brands and in-house brands of consumer packaged goods and manufactures its own bakery products in East Malaysia and Brunei. Near term outlook has turned positive following the recent bullish LT downtrend line breakout, which may provide ammunition for the bulls to retest RM0.30-0.33 targets. Key supports are RM0.275-0.285. Cut loss at RM0.27.

Source: Hong Leong Investment Bank Research - 13 Apr 2017