Market review

• Asian markets ended mixed lower last week as the MSCI Asia Pac (MXAP) index dropped 0.9% wow to 146.32 amid heightened geopolitical risks in Korean Peninsula. Situation was also affected by selloff in export stocks in Nikkei (-1.8% wow) amid stronger Yen following Trump’s remarks that he favours a low interest rates and a soft greenback.
• Tracking negative regional markets and lack of local catalysts, KLCI lost 10.7 pts wow to 1,731, following a 7.9-pt slide last Friday. Average daily volume and value also declined 8.7% and 24% to 3.78bn shares valued at RM2.31bn, respectively.
• Wall St was closed last Friday in observance of Good Friday. WoW, the Dow slid 203 pts or 1% to 20,453 amid mounting geopolitical tensions in the Middle East and Korean Peninsula. Investors also reduced position ahead of the start of 1Q17 reporting season and long holiday weekend.

Technical view

Extended consolidation towards 1705-1725 zones following the 30-d SMA support breakdown

• We reiterate that near term KLCI outlook remains dim unless it can swiftly regain its composure above the support trend line near 1747, reinforced by the negative trend and momentum readings. Following the fall below 30-d SMA last Friday, key supports this week are situated at 1725 (23.6% FR) and 1,705 (38.2% FR) levels. On the flip side, only a strong rebound above 30-d SMA again will spur KLCI to retest 1750-1759 (YTD high) levels.

Market outlook

• The Dow may test lower supports near 20k this week ahead of the 1Q17 earnings reporting season and heightened geopolitical temperature. Meanwhile, investors are trying to get a handle on Trump’s fiscal and economic plans following his flip-flop remarks lately.

• In line with the lingering geopolitical jitters and ongoing KLCI technical pullback, this could suggest the 4-month old uptrend since hitting a peak of 1759 (29 Mar) could be at its tail-end. Hence, the index is envisaged to remain in consolidation mode for a while until geopolitical hotspots dissipate. Although volatility remains, firmer Ringgit (vs US$) and oil prices will help to cushion any heavy selldown

Source: Hong Leong Investment Bank Research - 17 Apr 2017