Market Review

• Asian stock markets trended mixed following the tensions between Qatar and the Arab nations. Nikkei 225 dived 0.95% below the 20,000 level at 19,979.90 pts. Shanghai Composite Index and Hang Seng Index rose 0.52% and 0.35% as the latter were boosted by gains in the property stocks.

• Despite the FBM KLCI ended higher above 1,790 amid positive buying support within selected index heavyweights like Tenaga and IHH, the broader market was mostly traded into the negative territory; FBM KLCI added 0.17%, but FBM Small Cap fell 0.06%. Market breadth was negative with losers led gainers by 547-to- 342 stocks. Overall market volumes still below 3.0b mark at 2.30bn shares, worth RM2.62bn.

• Wall Street ended lower for the second consecutive days as concerns heightened ahead of the key events such as U.K. election, ECB meeting and ex-FBI director's testimony before the Senate which have pushed investors towards safe haven assets. Profit taking activities were noted on the Dow (-0.23%) and S&P500 (-0.28%).

Technical View

MACD Indicator positive cross, Stochastics hooking up

• The MACD Indicator has given a “buy” signal, while the Stochastics oscillator continued to trend higher after rebounding a few days back. Both the indicators are suggesting that the FBM KLCI may revisit the psychological level of 1,800. Meanwhile, key support will be located around 1,780.

Market Outlook

• We opine that traders would stay sidelines prior to the major events. Hence, volatility may only return on later this week on the US equities. As the Dow has retraced from the recent peak, we expect it to consolidate between 21,000-21,200.

• Meanwhile, on the local bourse, buying interest would remain focus within the index heavyweights and the FBM KLCI may retest the 1,800 level. However, the FBM Small Cap may stay soft after the emergence of a broad based selling pressure yesterday. Nevertheless, selective stocks within the metal related sector may be traded actively as values emerged after the recent profit taking activities.

• Closed position: We closed our position on COMFORT (6.9% gain) after hitting our R1 upside target yesterday.

Source: Hong Leong Investment Bank Research - 7 Jun 2017