Market Review

• Most of the key Asian indices started the week on a weaker tone amid few key events such as German and New Zealand elections. The Hang Seng Index and Shanghai Composite Index plunged 1.36% and 0.35% respectively, while a potential snap election has contributed to a decline in Japanese yen and Nikkei 225 gained 0.50%.

• Throughout the trading session, the FBM KLCI only fluctuated within a narrow range between 1,768-1,773 before ending marginally lower at 1,769.14 pts (-0.11%) – suggesting that investors were taking a cautious view on the market. Market breadth was negative with losers outpaced gainers by a ratio of 626-to-259 stocks. Some sectors like industrial, industrial products and trading/services bucked the trend – the latter was led higher by Airasia and TMCLife.

• Wall Street ended softer amid escalating tensions between US and North Korea as the exchange of words became much more serious than investors would have expected, coupled with the selling pressure on technology sector led by Apple.

Technical View

Consolidating around lower band of the uptrend channel

• The FBM KLCI ended lower for the fifth consecutive days, violating below the 1,770 level. The MACD Histogram extended another red bar, while the RSI and Stochastics oscillators are turning lower. We may anticipate the KLCI to trend sideways between the 1,760- 1,775 levels over the near term.

Market Outlook

• The unsettled geopolitical tensions may persist and the bearish sentiments could stay in the stock markets over the near term. Also, investors would turn their exposure for safe haven assets such as gold and yen.

• Tracking the negative trading tone in the overseas markets, we believe shares on the local front are likely to remain within the consolidation phase with a downward bias view as traders are likely to reduce their exposure amid the fearful comments between US and North Korea. However, traders may find opportunities within selected commodity sector such as gold and crude oil on the back of a recovery trend.

• Closed position: On 25 Sep, we took profit on AMBANK (2.5% gain) and squared off our position on KUB (2.9% loss) amid weakening technicals.

Source: Hong Leong Investment Bank Research - 26 Sept 2017