Market Review

• Tracking the mixed Wall Street performance, Asian regional stock markets were mostly lower after Federal Reserve increased the interest rates second time for the year and is looking to unwind its balance sheet starting this year. Hang Seng Index (-1.21%) and Australia ASX200 (-1.20%) took the biggest hit among the regional indices, while Nikkei 225 fell 0.26%.

• Trading environment was lackluster following the rate hike decision by the Federal Reserve, coupled with the weaker crude oil prices. The FBM KLCI hit an intra-day high near the 1,795 level before ending lower at 1,790.01 pts (-0.13%). Market volumes stayed just slightly below 2.0bn mark. Also, investors were taking a cautious stance and continued with the profit taking activities, contributing to a negative market breadth.

• US stock markets ended in the negative territory led by selling pressure among technology heavyweights such as Facebook, Alphabet and Apple, coupled with investors' concern over economy's health after Federal Reserve increase the interest rates. The Dow and S&P500 fell 0.07% and 0.22% respectively, while Nasdaq declined 0.47%.

Technical View

MACD Indicator narrowing, momentum declining

• The MACD Histogram has turned lower yesterday as the FBM KLCI ended marginally lower. The Stochastics oscillator is overbought; suggesting that the KLCI’s upside might be capped around the 1,790-1,800 levels after trading sideways over the past seven trading days. Meanwhile, the support will be located around 1,780, followed by 1,760.

Market Outlook

• We believe that the rally on the Dow could be in a toppish resistance zone near the 21,500 level as stochastics indicator is suggesting an overbought status on the Dow. Hence, we could expect a potential retracement towards 21,000-21,200. On the Nasdaq, should there be a further selloffs in tech stocks, next support will be pegged at around 6,000.

• Similarly, we opine that the trading tone on Bursa Malaysia will be lackluster following the Wall Street’s sentiments. Semiconductor related stocks in Malaysia could see another round of profit taking activities following the tech giants selldown observed in foreign markets. Meanwhile, oil and gas related shares may still trend lower amid lower crude oil environment

Source: Hong Leong Investment Bank Research - 16 Jun 2017