Market Review

• With little takeaways from the Jackson Hole meeting by Janet Yellen and Mario Draghi on monetary policies, investors remained indecisive throughout the session with Nikkei 225 (-0.01%) and Hang Seng Index (+0.05%) ended flattish, while the Shanghai Composite Index advanced strongly by 0.94%.

• Stocks on the local front traded with a lackluster mode as profit taking activities heightened with investors and traders deploying sell-into-strength strategy in this shortened trading week. However, FBM KLCI managed to secure into the positive territory on the back of last minute buying support in CIMB and Maybank. Market breadth was negative with losers led gainers by a ratio of nearly 2-to-1, while market traded volumes were slightly lower at 1.78bn.

• US stock markets ended mixed as the gains in health care and technology stocks were offset by the declines in energy and financials sectors amid the Hurricane Harvey, which hit the Gulf Coast region, causing some refining production to stop. The Dow and S&P500 ended flattish, while Nasdaq rose 0.28%.

Technical View

Daily MACD indicator turned negative

• The FBM KLCI has been trapped within a narrow range between the 1,764-1,777 levels over the past three weeks. The MACD Indicator continues to trend weaker after the daily crossover signal. Meanwhile, RSI and Stochastics oscillators are falling below 50 level – indicating that the momentum is likely to stay soft over the near term.

Market Outlook

• In the US, investors might be on the sidelines with the uncertain monetary policy decisions by the Fed, coupled with softer confidence towards Trump. Moreover, traders are monitoring the impact of Hurricane Harvey towards the US economy should there be further shut down of production in the Gulf Coast region. We think that the short term trend on the Wall Street is likely to maintain sideways, with the Dow having a firm resistance along the 22,200 level.

• Meanwhile, taking cues from the mixed overnight Wall Street performance, stocks on the local bourse could extend the profit taking activities in the absence of fresh catalyst to boost market sentiments throughout the shortened trading week and final week of financial reporting season. The KLCI's upside is likely to be capped around 1,780.

• Closed position: We squared off our position in PTRANS (11.3% gain) yesterday amid expiry.

Source: Hong Leong Investment Bank Research - 29 Aug 2017