Market Review

• Despite the rally on Wall Street amid decent earnings season, Asian equities ended in the negative territory as one of the officials from China's National Development and Reform Commission commented on a potential black swan or high impact events that may occur in 2018. Shanghai Composite Index and Hang Seng Index declined 0.97% and 0.56%, respectively, while Nikkei 225 slipped marginally by 0.01%.

• Bucking the regional trend, the FBM KLCI managed to stay in the positive tone with the help of buying support within banking heavyweights - the FBM KLCI gained 0.90% to close at 1,870.52 pts. Market breadth, however was negative with decliners led gainers by 623-to-370 stocks. Overall market volumes stood at 3.00bn.

• Stocks in the US noticed some selling pressure after Apple commented on the reduction in iPhone X production by half. Most of the technology giants seen closed in the negative zone, whereby Nasdaq declined 0.52%, while S&P500 and the Dow ended lower by 0.67%, respectively.

Technical View

Upside limited amid overbought technicals

• The key index managed to gain momentum after surpassing the resistance of 1,860 and the MACD Line is pointing upwards. However, both the RSI and Stochastics oscillators are still suggesting that the key index is overbought. Hence, we think the upside could be limited near the 1,880-1,890, which is near to the all-time-high of 1,896. Should there be a violation of 1,860, next support will be at 1,840.

Market Outlook

• In the US, following Apple's statement on the production status, investors may have mild concerns on the on-going earnings season. Also, traders may trade on a cautious tone ahead of the Fed's meeting with the anticipation of potential tightening of the monetary policies amid the recovering US growth environment.

• We think the negative sentiments may spillover towards Malaysia’s equities as the KLCI is heading towards the all time-high zone near the 1,900 level, contributing towards a potential emergence of profit taking activities. Also, with the Brent crude oil fallen more than 1%, traders may be locking in profits on O&G stocks.

Source: Hong Leong Investment Bank Research - 30 Jan 2018