Market Review

• In anticipation of comments Janet Yellen (10pm on 12 July) and the start of US 2Q17 earnings season this week, Asian markets rose as technology shares spurred the advance for a 2nd day. Sentiment was also boosted by a weaker yen, benefiting export-oriented stocks in Japan’s markets. Overall, the MSCI Asia Pac index gained 0.7% or 1 pt to 154.35 to record a 14.3% surge YTD.

• KLCI lost 2.1 pts to record its 3rd straight losses after traded within a range of 5.5 pts between an intra-day high of 1,758 and a low of 1,752. Sentiment was tepid in the absence of fresh catalysts and market breadth was bearish with 198 gainers as compared to 715 losers. Market activities were focused on newly listed IPO Lotte (-12 sen at RM6.38) and lower liners, which raised trading volume by 3.6% and 36.1% to 1.73bn shares worth RM2.07bn, respectively.

• The Dow tumbled as much as 129 pts after the president’s son Donald Trump Jr. released emails he exchanged ahead of a meeting with a Russian lawyer last year that indicated the Russian government was backing his father’s presidential campaign and trying to damage his opponent. However, the index rebounded and ended flat, aided by rallies in technology and oil & gas stocks ahead of the testimony from Janet Yellen and the rebound in oil prices coupled positive expectations of the start 2Q17 earnings season.

Technical View

Extended consolidation amid negative indicators

• In the near term, KLCI is likely to engage in consolidation mode as the benchmark is trending below the key 10- d/20-d/30-d/50-d SMAs, compounded by negative MACD and RSI indicators. Nevertheless, the Stochastics oscillator is getting oversold, suggesting that the key index may be due for a technical rebound towards immediate targets at 1,763-1,771 zones.

Market Outlook

• On Wall St, investors are likely to trade cautiously ahead of the Fed’s testimony, the release of oil stockpiles and the start of the 2Q17 reporting season. However, the long-legged Doji formation overnight could indicate a degree of strength for the Dow to continue to build its base above the 50-d SMA or 21,162.

• On Bursa Malaysia, selected shares may be due for a technical rebound after the KLCI breached below the 1,760 level for the 3rd straight sessions, coupled with an oversold signal from the slow stochastic indicator. Focus will remain on lower liners and oil & gas stocks amid a rebound in oil prices overnight.

Source: Hong Leong Investment Bank Research - 12 Jul 2017