Market Review

• Most Asian markets rose as the Fed's dovish slant has underpinned optimism among equity investors. Sentiment was also driven by a rebound in oil & gas stocks following recent relief rally in oil prices and expectations of a sustainable global economic recovery. Overall, the MSCI Asia Pacific index (MXAP) grew 1.2 pts or 0.8% to 157.43 to record its 5th straight gains. The index also jumped 3.1% wow and 16.6% YTD.

• Driven by overnight record gains in Wall St, KLCI inched up 1.2 pts last Friday at 1,755 to wrap up the listless week lower by 5 pts or 0.3% (+6.9% YTD). Sentiment was tepid in the absence of fresh catalysts and market breadth was negative with 369 gainers as compared to 469 losers. Market activities were focused on ACE counters and lower liners, which raised trading volume by 36% to 2.38bn shares worth RM1.91bn.

• On the back of better-than-expected financial results and a pair of tame inflation and weak retail sales numbers, which dulled prospects of more interest rate hikes this year, the Dow rose 85 pts at a fresh new high of 21,638. Sentiment was also boosted by a less hawkish testimony by Yellen this week and a recovery in oil & gas stocks as WTI recorded a 5th consecutive rebound. Following Friday’s gains, the Dow rallied 1.1% wow and 9.5% YTD.

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. Nevertheless, sharp downside risks are limited as MACD histogram is turning positive and the Stochastics oscillator is grossly oversold. Weekly supports are 1,750 and 1,741 (120-d SMA). On the flip side, an oversold rebound above immediate resistance of 1,760 will spur greater upside towards 1770-1774 (30-d SMA) zones.

Market Outlook

• On Wall St, investors’ optimism of an encouraging 2Q17 results and accommodative monetary policy is likely to provide a boost to Dow in the near term towards 22k levels, supported by bottoming up technical indicators.

• On Bursa Malaysia, KLCI may be due for a mild technical rebound this week after falling 4th straight weeks to play catch up with regional peers. Nevertheless, any rebound is likely to be capped near 1774 levels due to lack of fresh catalysts. Focus will likely remain on lower liners and oil & gas stocks amid a rebound in oil prices.

Source: Hong Leong Investment Bank Research - 17 Jul 2017