Market Review

• Asian key regional stock markets were mostly negative following the missile launching in North Korea – the Shanghai Composite and Nikkei 225 fell 0.39% and 0.12% respectively. Meanwhile, Hang Seng Index dived 1.53% led by the plunge in Tencent Holdings (-4.3%).

• Despite the positive performance on the overseas markets, shares on the local front take a beating and the FBM KLCI declined 0.37% led by profit taking activities among Petronas-related stocks. Market breadth was still negative with decliners ahead of advancers by a ratio of 488-to-347. Meanwhile, market traded volumes have started to pick up, registering 1.90bn shares traded vs. 1.76bn a day earlier.

• European stocks were mostly lower, accompanied by thin trading volumes as the US was closed for Independence Day public holiday. Also, North Korea's missile program has pulled down the market sentiments, globally. The FTSE 100 has slipped 0.27%, while CAC 40 and DAX ended lower by 0.40% and 0.31% respectively.

Technical View

Hitting resistance along 1,770 and selling pressure emerged

• After the rebound from 1,757, KLCI has revisited 1,770. Buying interest took a pause as most of the indicators such as MACD Histogram and RSI have turned lower. The FBM KLCI’s upside could be capped along 1,770- 1,780. Meanwhile, support will be located around 1,750- 1,760.

Market Outlook

• In the US, we believe the stock markets may continue to hover sideways over the near term ahead of G20 summit, where Trump-Xi will meet up in Germany to discuss global issues with other G20 leaders. Also, investors could be slightly cautious ahead of the jobs data on Friday.

• Meanwhile, on the local front, we expect the pullback phase to extend and may revisit 1,760 as foreign participation has started on the net outflows position over the past two weeks. Should there be a downward violation of 1,760, next support will be seen around 1,740. Nevertheless, traders may find opportunities among furniture-related stocks as they were traded actively. Please refer to our institutional report yesterday on HeveaBoard with Buy call (TP: RM2.19).
   
• Closed position: We took profit on GCB (20.4% gain) after hitting our long term target at RM1.30 yesterday.

Source: Hong Leong Investment Bank Research - 5 Jul 2017