Market Review

• Asian regional stock markets stayed in the sideways mode as investors remained cautious ahead of the conclusion of the FOMC meeting regarding the comments on balance sheet unwinding and the interest rates hike decision. The Hang Seng Index and Shanghai Composite Index fell 0.38% and 0.18% respectively, but Nikkei 225 rocketed 1.96% after resuming from a public holiday on Monday.

• Despite the bulls charging towards few record highs on Wall Street, the FBM KLCI extended its profit taking activities led by CIMB and IHH. Market breadth turned negative with losers outpaced gainers by a ratio of 5-to-3. Overall traded volumes were marginally higher at 2.01bn vs. 1.99bn on Monday. Nevertheless, consumer index bucked the trend as the sub-indices rose 0.09% with the help of QL Resources and MSM.

• Wall Street remained bullish at the start of the FOMC meeting led by banking, telecommunication and technology stocks as the Dow marked another fresh record highs, while the US dollar index weakened below the 92 level as investors could be anticipating a non interest-rates-hike-meeting this round. The Dow and S&P500 rose 0.18% and 0.11% respectively.

Technical View

Weaker uptrend tone after violating below 1,780

• The FBM KLCI retraced below 1,780 with the significant selling pressure noted in CIMB. The MACD Histogram extended another red bar, while the Stochastics turned lower and RSI hooked below 50 – indicating softer positive momentum. Hence, we think the upside might be capped along 1,790 and the support will be anchored around 1,760-1,770.

Market Outlook

• In the US, we believe the uptrend position may remain stable in the absence of negative headlines. Generally, steadier trading activities may be seen at the end of the FOMC meeting as investors are waiting for clues on the interest rate hike and the balance sheet dialback decisions. Also, traders may focus on energy shares with the firmer recovery in WTI crude oil above the US$50 level.

• Meanwhile, with the FBM KLCI pulled back below the 1,780 yesterday, we think that the retracement may persist as profit taking activities continue to take place. Shares on the local front may trade on a negative bias mode over the near term. Nevertheless, selected stocks within the commodity-related sector may still benefit from the firmer underlying trend such as crude oil and steel.

Source: Hong Leong Investment Bank Research - 20 Sept 2017