Market Review

• With the weaker tone from Wall Street, stocks in the regional markets ended on a mixed tone following another high ranking official, Steve Bannon left the Trump administration. The Nikkei 225 fell 0.40%, while Hang Seng Index and Shanghai Composite Index added 0.40% and 0.57% respectively.

• Meanwhile, shares on Bursa Malaysia ended on a negative note as the FBM KLCI slipped 0.26%. Market breadth was negative with 444 decliners vs 379 advancers. Market traded volumes stood at 1.68bn, worth RM1.78bn. Nevertheless, selected consumers stocks like NESTLE, Heineken and Carlsberg ended in the positive territory, while most of the FBM ACE (+0.68%) stocks rebounded.

• Wall Street ended slightly higher as tensions between the US and North Korea, coupled with the softer energy shares capped gains on the stock markets. Also, buying support was weak as investors switch their focus on the upcoming Jackson Hole meeting later this week. The Dow and S&P 500 rose 0.12% and 0.13% respectively, but Nasdaq slipped marginally by 0.05%.

Technical View

Turning mildly negative on indicators

• The FBM KLCI reversed and closed lower after hitting the daily SMA20. The MACD Line trended flattish, while the MACD Histogram has turned red. The Stochastics oscillator is pointing downwards. Hence, the immediate resistance will be envisaged at around 1,780, followed by 1,800. However, should there be a violation below the 1,770 level, next support will be located around 1,760, followed by 1,750.

Market Outlook

• In the US, we think the trading tone could stay sideways over the near term as investors may deploy the wait-and see strategy while waiting for further clues from Federal Reserve in Wyoming this week. The Dow's upside is likely to be capped near the 22,200 level.

• On the local bourse, we could expect market environment to stay cautious with the on-going reporting season this month. Hence, KLCI's upside may be limited at 1,780. Also, technology stocks may still extend its profit taking activities and stay sluggish as the Nasdaq ended slightly lower yesterday. Meanwhile, oil and gas stocks may face with selling pressure as WTI and Brent crude oil declined more than 1% respectively.

Source: Hong Leong Investment Bank Research - 22 Aug 2017