Market Review

• Key regional indices ended on a positive note ahead of the Fed’s meeting minutes while investors also stayed mildly bullish prior to the OPEC meeting as Brent crude oil stayed firmer near US$54. The Nikkei 225 gained 0.66%, while Shanghai Composite Index (+0.06%) and Hang Seng Index (+0.10%) were flattish ended flattish.

• Tracking the positive performance on the overnight Dow, the FBM KLCI (+0.22%) ended in the positive territory, but the FBM Small Cap Index slipped 0.07% as profit taking activities were seen across the board. Market breadth was negative with 546-to-419 stocks, while market volumes stood at 3.38bn shares.

• US stock markets continued to progress higher after the Federal Reserves meeting minutes suggested that it would scale back its US$4.5trillion balance sheet. Also, the Fed mentioned in FOMC meeting that the interest rates hike will depend on the situation of the US economy. The Dow ended higher at 21,012.42 pts (+0.36%), while S&P500 gained 0.25%.

Technical View

KLCI rebounded, but MACD Indicator is trending lower

• The MACD Line is still hovering below the Signal Line, indicating that the trend is on a weaker position. The Stochastics oscillator is flattish near 50. Buying interest may further emerge if the FBM KLCI surges above the 10-D SMA, setting next resistance at around 1,780- 1,790. On the flip side, KLCI’s support will be pegged around 1,760.

Market Outlook

• As the market shifted their focus temporary on the Fed's meeting minutes and interest rates hike possibility, we opine that investors will extend their relief rally over the near term with the Dow securing above the psychological level of 21,000. Next resistance will be envisaged around 21,178-21,200.

• Meanwhile, share prices on the local bourse could see another short term gains on the FBM KLCI following the feel-good mood from the overnight overseas markets. However, we opine that the FBM KLCI's upside will be limited around the 1,780-1,790 level as traders may be still deploying selling-into-strength strategy after the recent profit taking activities were noticed across the small cap and lower liners. However, the launch of Mid and Small Cap Research Scheme by Bursa Malaysia later today may cap the downside of such activities.

Source: Hong Leong Investment Bank Research - 25 May 2017