Market Review

• Most of the Asian regional indices experienced some selling pressure after the conclusion of FOMC meeting while digesting renewed concerns over North Korea threat. The Nikkei 225 and Hang Seng Index slipped 0.25% and 0.82% respectively, while Shanghai Composite Index declined 0.15% after S&P downgraded China's sovereign credit rating.

• In tandem with the regional stock markets, FBM KLCI ended in the negative note, slipping 0.14% led by Petronas Gas and Genting Malaysia. Market breadth stayed weak as decliners led advancers by a ratio of 473- to-384. However, trading interest picked up strongly with the market volumes hitting above the 3.0bn at 3.25bn (42.5% above the 100-day volumes average of 2.28bn. Also, technology sector bucked the broader market trend and ended higher by 1.84% for the sub-indices led by stocks such as INARI and VITROX.

• US stock markets ended in a mixed note with the renewed concerns over geopolitical tension as North Korea mentioned that another hydrogen bomb test is possible. However, the Dow managed to close positive for the week by 0.36% with the easing of worries on healthcare bill reform. Meanwhile, dollar index trended slightly firmer above 92 after the Fed signaled a potential interest rate hike in December.

Technical View

Still within the consolidation phase

• The FBM KLCI extended another day of losses forming a slightly negative technical position on the MACD Indicator. The RSI and Stochastics oscillator however are still hovering above 50. We think the downside could be limited around 1,760. Meanwhile, the resistance will be pegged at 1,780-1,790.

Market Outlook

• With the US stock markets trading near the all-time-high zone with overbought status noticed on most of the major indexes, we think trading sentiment may turn cautious in tandem with the balance sheet unwinding process that would be starting in October.

• Meanwhile, we believe shares on the local market may remain sluggish with extended profit taking activities. The FBM KLCI may stay sideways after the recent retracement phase. Nevertheless, commodity-related stocks could stay firm with the recovering underlying trend on crude oil and steel.

• Closed position: On 21 Sep, we took profit on BIOHLDG (5.9% gain) and squared off our position on EKOVEST (0.9% loss) due to expiry.

Source: Hong Leong Investment Bank Research - 25 Sept 2017