Market Review

• Asian regional equities ended mixed as dollar continued to weaken below the 90 level against a basket of currencies. Nikkei 225 declined 0.76% led by broad selloffs among automakers and manufacturing companies. However, Hang Seng Index and Shanghai Composite Index rose 0.08% and 0.40%, respectively.

• Bucking the trend of the positive overnight Wall Street, sentiments on the local front ended in the consolidation mode throughout the whole trading session. Market breadth was negative with losers led gainers by a ratio of 6-to-4. Nevertheless, selected oil and gas stocks such as ARMADA and DIALOG were traded actively higher.

• Despite the more positive earnings season in the US, coupled with the weaker dollar, US equities ended mixed as selling pressure emerged after comments from US Commerce Secretary Wilbur Ross, which may stir a potential trade war against China. The Nasdaq and S&P500 fell 0.61% and 0.06%, respectively.

Technical View

SMA50 crossed above SMA200

• The FBM KLCI extended its consolidation over the past week below 1,840 and the MACD Line is hovering below Signal Line. Meanwhile, both the RSI and Stochastics oscillators are weakening. Hence, we believe the upside could be limited around 1,850-1,860. Should there be a violation of 1,830, next support will be pegged around 1,810-1,820.

Market Outlook

• In the US, market rally has been trending upward without significant pullback and traders are likely to stay cautious in the event of any unpleasant news surfaces in the market that could warrant an extension of selling pressure. The Dow's resistance is located near 26,500- 27,000.

• On the local bourse, investors could be on a wait -and-see mode ahead of the reporting season to reassess their portfolio. However, we still hold on to our view in 1Q18, which could be favourable towards consumer, construction and selected O&G stocks on the back of firmer ringgit and GE14 thematic trading ideas.

Source: Hong Leong Investment Bank Research - 25 Jan 2018