Market Review

• Asian stock markets ended on a flattish tone following the breakup in the manufacturing advisory council in the US, coupled with the mixed views on the interest rates decision after investors digesting the FOMC meeting minutes. The Nikkei 225 and Hang Seng Index fell 0.14% and 0.24% respectively, but Shanghai Composite Index added 0.68%.

• Still, stocks on the local front remained positive and the FBM KLCI managed to eke out marginal gains of 0.14% to end at 1,776.31 pts. Market breadth was positive as buying support was firmer compared to last week. There were 494 gainers, 332 decliners, while 399 traded unchanged. Market traded volumes stood at 1.80bn shares, worth RM1.88bn. Technology sector managed to surge to a new high at 38.16 pts.

• Meanwhile, following the dismissal of few advisory councils in the US, investors turned negative as concerns over Trump's economic agenda might be delayed and the Dow and S&P500 dived 1.24% and 1.54% respectively, while the Nasdaq plunged 1.94% led by Cisco System after posting weaker-than-expected results.

Technical View

Short term momentum still positive, but resistance seen around 1,780

• The FBM KLCI traded consecutively higher over the past 4 days and the MACD Line turned green, while the RSI is hovering above 50 with a positive gradient – indicating that the short term momentum is still positive. However, KLCI’s resistance will be envisaged around 1,775-1,780, while the support will be pegged around 1,760-1,765.

Market Outlook

• The Trump's council-crisis, coupled with the rumor of Gary Cohn leaving the White House have triggered a jittery moments in the stock markets. Investors may remain cautious over the near term and deploy selling into-strength strategy amid declining confidence towards Trump, curtailing the upside around 22,200.

• Similarly, selling pressure could emerge on the local front with the negative overnight performance on Wall Street. The recent upward move on the technology sector may hit a resistance as Nasdaq plunged nearly 2.0% overnight. We think traders might want to deploy sell-into strength strategy as upside of the FBM KLCI's could be limited around 1,780.

Source: Hong Leong Investment Bank Research - 18 Aug 2017