Market review

• Asian stock markets ended mostly lower as sentiments turned negative amid the deadly bombing news in Manchester, which killed 22 persons. The Nikkei 225 fell 0.33% as yen strengthened mildly, while Shanghai declined 0.45%.

• After the FBM KLCI crept higher near the 1,780 level, selling pressure emerged led by Petronas Gas and IHH and most of the stocks on the broader market trended into the negative region as Brent crude oil eased below US$54; market breadth turned negative as the decliners led advancers by 636-to-292 stocks. Overall market volumes stood at 2.91bn.

• Wall Street continued to advance for the fourth consecutive trading days as investors turned their focus on Trump's budget plans, aiming to cut government spending by US$3.6 trillion, while increasing the infrastructure and military spending. The Dow retested the 21,000 psychological level and ended at 20,937.91 pts (+0.21%).

Technical view

FBM KLCI may pullback towards 1,760 amid weaker technical readings

• The MACD Indicator continues to stay soft as the MACD Histogram turned red. Both the RSI and Stochastics indicators are hooking downwards; indicating that the FBM KLCI may pull back towards the 1,760 level. Meanwhile, resistance will be envisaged around the 1,780 level.

Market outlook

• In the US, following the recent buying support which has sustained the Dow to revisit the resistance of 21,000, we opine that investors may adopt a cautious stance ahead of OPEC meeting. Hence, profit taking activities may limit the Dow's upside over the near term. Also, investors will need to understand more of the Trump’s budget details before investing aggressively into the markets.

• However, shares on Bursa Malaysia could be due for a mild technical rebound following the selling activities yesterday. Trading interest is likely to hover around the O&G sector as the Brent crude oil traded near US$54 and traders may look for opportunities amid the on-going reporting season

Source: Hong Leong Investment Bank Research - 24 May 2017