Market Review

• Most of the Asian stock markets trended on a weaker tone on the back of higher US government debt yield. The Nikkei 225 declined 0.90% as BOJ attempted to curb the rise in Japanese bond yields by offering an unlimited amount of long-term Japanese government bonds. Meanwhile, Hang Seng Index fell 0.12% and Shanghai Composite Index rose 0.46%.

• The FBM KLCI managed to buck the regional trend and inched up marginally by 0.1% to 1,870.48 pts. Market breadth, however was negative with decliners ahead of advancers by a ratio of 6-to-4. Overall market volumes stood at 2.61bn. Nevertheless, consumer related stocks such as Nestle, Padini, Malayan Flour Mills and F&N traded higher.

• Wall Street traded on a volatile mode as the Dow dived more than 600 pts on Friday and fallen more than 1000 pts on the weekly basis as market reacted towards the better-than-expected jobs report, which may eventually send the interest rates higher. Also, the benchmark 10- year yield rose to 2.84% and has dampened the market sentiments for the session.

Technical View

Mixed technicals may suggest limited upside

• Over the week, the FBM KLCI has charged towards another resistance near the 1,880 level. The MACD indicator is still positive, while both the RSI and Stochastics oscillators are overbought. With the mixed indicators, the key index's upside could be limited around 1,890-1,900. Meanwhile, the next support will be pegged around 1,840-1,850.

Market Outlook

• With investors spooked by the rising global bond yield, whereby the Fed may turn more hawkish-than-expected, we think the global selloffs could extend over the near term as traders may shift their investment from stocks to bonds. The Dow's support will be located around 25,000. Should there be a violation below that psychological level, next support will be at 24,000.

• Also, the negative regional sentiments could spillover to the Malaysia's stock market, leading towards an extended profit taking measure by the traders, eventually. Small caps and lower liners may suffer another round of selloffs, while heavyweights are likely to see limited upside as the FBM KLCI is trading near the 1,890 zone. Nevertheless, in this market environment, traders may look into consumer stocks which have solid fundamentals and stable dividend yield.

• Closed position: We took profit on HIAPTEK (13.5% return) at RM0.505 (closing price) as share prices hit above R2 upside target.

Source: Hong Leong Investment Bank Research - 5 Feb 2018