Market Review

• Despite the political uncertainty in the Washington, Asian stock markets ended on a positive note prior to the conclusion of the Jackson Hole meeting; the Shanghai Composite Index and Hang Seng Index surged strongly by 1.84% and 1.20% respectively, while Nikkei 225 added 0.51%.

• Meanwhile, profit taking activities emerged on the local front and the FBM KLCI fell 0.36% to 1,769.17 pts (-0.40 wow). On the broader market, active stocks were dominated by the small caps and lower liners from the ACE market, while market breadth was negative with 546 decliners, 323 gainers, while 367 traded unchanged. Overall traded volumes were firmer at 2.0bn for the session, worth RM1.93bn.

• Wall Street trended mixed throughout the yearly Economic Policy Symposium event, looking for clues from Janet Yellen and Mario Draghi on monetary policies, especially on tapering plans by the ECB. The Dow and S&P500 rose 0.14% and 0.17% respectively, while Nasdaq slipped 0.09%. Nevertheless, downside was limited following remarks from Trump’s economic adviser Gary Cohn, stating that President Trump is focusing on getting tax reform done by end of the year.

Technical View

Daily MACD indicator turned negative

• The FBM KLCI has fluctuated around the 1,770 level over the past month. The weekly MACD Histogram has turned weaker, while the Daily MACD Indicator has given a “Sell” signal. Meanwhile, the daily RSI and Stochastics oscillator are trending lower. Hence, the resistance will be envisaged around 1,780-1800, while support will be pegged around 1,750-1,760.

Market Outlook

• In the US, we think trading sentiments could remain mix amid softer confidence of market participants towards President Trump’s policies. Investors could look for further signs of monetary policies in the upcoming FOMC meeting. Also, few economic events that we could focus will be the US revised second quarter GDP figures on Wednesday as well as US employment data and UK Manufacturing PMI on Friday. Hence, upside of the Dow will be capped along 22,200.

• Still, share prices on the local front are likely to trend sideways amid a shortened trading week ahead. Moreover, the weaker quarterly reporting season would also be a capping the upside on the FBM KLCI around the 1,780 level. Nevertheless, technology sector remains bullish after reporting upbeat results for most of the stocks.

Source: Hong Leong Investment Bank Research - 28 Aug 2017