Market Review

• Asian markets ended mixed last Friday as investors chose to take some profit off the table after the MSCI Asia Pacific index (MXAP) recorded its 10th straight gains. To recap, the index had rallied 1.4% wow and 18.2% YTD. Sentiment was cautious amid US political uncertainty after an investigation into President Trump that may stall his economic agenda. The Fed’s meeting on 26 July also kept some investors on the sidelines after the ECB said it is prepared on policy normalization later this year.

• Ahead of the 13th Investment Malaysia on 25 July, KLCI gained 3.5 pts last Friday to end the week 4.2 pts higher, after falling 4 weeks consecutively. The market traded within a range of 6.8 pts between an intra-day high of 1759.2 and a low of 1752.4, with trading volume increased to 1.86bn shares worth RM1.78bn against Thursday’s 1.72bn shares worth RM2.00bn, focusing on ACE stocks and lower liners. Market breadth was positive with 436 gainers as compared to 384 losers.

• The Dow eased 32 pts at 21,580 and ended the week 0.3% lower following a subdued outlook from index component GE (-2.9% to $25.91) as the company warned that its earnings for the year will likely be at near the bottom of its projected range. Sentiment was also dampened by softening USD as investors assessed an investigation into Trump that may stall his economic agenda and ahead of Fed’s meeting coupled with sliding oil prices after reports that OPEC supply increased this month.

Technical View

Signs of bottoming up

• After tumbling from YTD high of 1796.8 on 16 June to a 3M low of 1751.6 on 12 July, KLCI finally staged a relief rally last week to notch its 1st gain in 5 weeks. This week, we may see KLCI to inch up further after closing above the 10-d SMA, supported by bottoming up technical indicators. Weekly resistances are 1770 (30-d SMA) and 1777 (upper Bollinger band) while supports are situated near 1751 and 1748 (lower Bollinger band).

Market Outlook

• In the short term, the Dow is likely to brace for more volatility after hitting all time high of 21682 on 14 July amid the political uncertainty driven by Trump’s investigation and the Fed meeting coupled with the ongoing reporting season in the midst of less-than-stellar economic data recently.

• On Bursa Malaysia, KLCI may be ripe for a 2nd week of technical rebound to play catch-up with regional peers ahead of the 2-day Invest Malaysia event, amid speculations that Government may reveal the new master developers of Bandar Malaysia.

Source: Hong Leong Investment Bank Research - 24 Jul 2017