Market Review

• Asian key benchmark indices extended the selling momentum following the negative weekly performance on Wall Street on the back of rising treasury yield. The Hang Seng Index and Nikkei 225 declined 1.1% and 2.6%, respectively.

• Local bourse took a hit as the FBM KLCI took a dive of 0.93% to close at 1,853.07 pts, in tandem with the regional performance. Most of the counters have fallen after the severe plunge in the US – market breadth was extremely negative with decliners overwhelmed advancers by a ratio of near to 6-to-1. Nevertheless, some up counters include the consumer stocks such as Nestle, F&N and MyNews.

• US stock markets were traded in heightened volatility environment as the Dow plummeted more than 1,175.21 pts or 4.60% for the day to end at 24,345.75 pts. The sentiments were dampened once again by the rising interest rates environment on the back of solid economic data, which inflation concerns may slowdown the pace of the equities. Meanwhile, VIX Index (fear index) shot up by more than 100% to 37.3 pts.

Technical View

Technical indicators pointing towards a consolidation

• The FBM KLCI was pushed towards near the immediate support of 1,842 and rebounded towards 1,855. The MACD Histogram has turned red, while the RSI and Stochastics are turning lower. We think the KLCI may perform a mild technical rebound towards 1,860 and likely to extend the consolidation for the week around the 1,840- 1,860 levels. Should the KLCI breaches 1,840, next support will be anchored around 1,830.

Market Outlook

• Market jittery on Wall Street may continue amid the rising concerns on the interest rates environment on the back of solid economic data, where investors anticipate a rise in inflation numbers, eventually. Also, we think the recent pullback phase is healthy as the Dow has not been taking a breather since the steep upward rally from the 18,000 psychological level.

• On the local front, we think equities are likely to extend the selling activities over the near term with the heightened volatility in the global markets. Also, we may anticipate the heavyweights to take another round of selloffs, contributing towards a softer FBM KLCI around 1,830 levels. Nevertheless, traders could look into solid fundamental stocks and GLC-related for bargain hunting activities and GE14 thematic ideas.

Source: Hong Leong Investment Bank Research - 6 Feb 2018