Market Review

• Asian stock markets traded into the negative territory as investors focus on North Korea missile launch over Japan, escalating worries lead investors to safe-haven assets. The Nikkei 225 and Hang Seng Index declined 0.45% and 0.35% respectively, while Shanghai Composite Index inched marginally higher by 0.09%.

• On the local bourse, selling pressure was noted after the North Korea missile launch and the FBM KLCI violated 1,765 to end at 1,761.15 pts (-0.47%) led by Maybank and CIMB. Market breadth was negative with 622 decliners, 271 gainers while 333 traded unchanged. Market traded volumes stood at 1.46bn, which is 40% below the 100-day volumes average of 2.43bn.

• Wall Street rebounded as geopolitical tensions subsided, couple with better-than-expected consumer confidence index in the month of August. Also, technology sector such as Apple shares hit an all-time-high zone added to the positive sentiments. The Dow and Nasdaq gained 0.26% and 0.30% respectively, while S&P500 ended marginally higher by 0.08%.

Technical View

Technical indicators trended weaker

• The FBM KLCI has breached below the earlier support of 1,765 after three weeks of consolidation between the 1,765-1,777 levels. The MACD Indicator turned weaker and both the RSI and Stochastics oscillators are suggesting negative momentum may persist over the near term. Should there be any technical rebound on the KLCI, upside could be capped along 1,770-1,780. Meanwhile, support will be located around 1,760.

Market Outlook

• Without the escalation of North Korea incident into an exchange of words between US-North Korea coupled with the recovery focus on the damage caused by the Hurricane Harvey, it is believed that market sentiments may still recover further after the Dow recouped more than 200 points losses on an intraday basis. The next resistance will be located around 22,000.

• Similarly, positive trading tone may spillover towards the local equities after the emergence of selling pressure yesterday, which accompanied by softer overall volumes. With most of the technology giants led the gains on Wall Street, technology stocks on Bursa Malaysia may regain traction as well. Nevertheless, the KLCI's upside will be envisaged around 1,770-1,780.

• Closed position: We squared off our position in 3A (4.4% loss) yesterday amid weakening technicals.

Source: Hong Leong Investment Bank Research - 30 Aug 2017