Market Review

• Still, Asian stock markets trended on a mixed note affected by lingering worries on North Korea’s nuclear test. The Nikkei 225 fell 0.63%, but Shanghai Composite Index gained 0.16% on the back of better-than-expected Caixin services PMI, while Hang Seng Index ended flattish.

• Meanwhile, FBM KLCI ended in the negative territory after a gap-up move towards 1,786 level upon the opening bell. Trading activities were fairly strong as the market volumes were above 2.0bn mark at 2.52bn shares traded for the day. However, market breadth was negative with losers outpacing gainers by a ratio of 596- to-364. On the broader market, most of the China-linked counters such as CSL, MAXWELL and CNOUHUA were traded actively.

• The US stock markets resumed trading after a long weekend and ended the day with a sharp fall amid the rising fear of North Korea hydrogen bomb test. Investors were deploying selling into strength strategy in the absence of any major events and significant economic data for the day. The Dow and S&P500 plunged 1.07% and 0.76% respectively.

Technical View

MACD Line above zero, in tandem with oscillators

• The FBM KLCI gapped up towards 1,786 but was unable to end in the positive territory. The MACD Line is hovering slightly above zero. However, both the RSI and Stochastics oscillators are hovering below 50. We can expect the key index to trend on a downward bias mode over the near term with the resistance located around the 1,780-1,790 regions. On the flip side, support will be pegged around 1,750-1,760.

Market Outlook

• With the escalation and ongoing concerns related to North Korea missile and nuclear tests, investors may reduce exposure in equities for safe haven assets over the near term. Also, traders could be monitoring the potential hit of another hurricane, Irma near the southern United States this week following Harvey, which has caused damages in the range of billions.

• Similarly, tracking the negative tone on Wall Street, we may expect spillover of jittery sentiments on our local bourse. Investors are likely to stay cautious and trade within defensive sectors such as sectors with higher dividend yield and gold-related stocks such as Tomei and Poh Kong. Meanwhile, the KLCI's upside is likely to be capped around 1,780-1,790.

Source: Hong Leong Investment Bank Research - 6 Sept 2017