Market Review

• Although Wall Street had taken a pause after the rebound, most of the Asian stock markets traded into the positive region as US dollar was stronger against the basket of currencies throughout the Asian session. The Nikkei 225 and Hang Seng Index rose 1.35% and 0.42%, respectively, but Shanghai Composite Index dived 1.42% on the back of weaker China yuan.

• Market tone turned sideways and the FBM KLCI inched slightly higher by 0.15% to 1,839.4 pts, accompanied by softer volumes. The market breadth was positive with gainers led losers by a ratio of 5-to-4. Also, consumer and selected steel stocks were traded actively higher – the latter gained momentum after MITI imposed anti-dumping duties on imports related to cold-rolled stainless steel (CRSS) for five years from China, South Korea, Taiwan and Thailand.

• Despite some bullish earnings report and better-than expected jobs data, Wall Street took another round of plunge, falling more than 1,000 pts or 4.15% to end below the psychological support of 24,000 led by financial and technology stocks.

Technical View

Limited upside after gap being covered

• The FBM KLCI stayed above 1,840, but we think the upside will be limited with the negative performance from Wall Street. The MACD line stayed below the signal line – indicating that the momentum is weakening. However, RSI and Stochastics oscillators are slightly above 50. The resistance will be envisaged around 1,840-1,850. Meanwhile, support will be located around 1,820-1,830.

Market Outlook

• In the US, downside risk remains intact as concerns over rising inflation environment and spiking of US 10-year bond yields may contribute to further volatility in the stock markets. However, the recent pullback phase will be seen as a healthy market correction as the recent economic data is still suggesting that the economy is on recovery and expansion modes.

• Trading activities turned milder after the huge volatility in the market and with the negative performance on the overnight Dow, upside on the FBMKLCI is likely to be limited around 1,840. Nevertheless, we think the trading focus will be on defensive sector, such as consumer related stocks.

• Closed positions. We had squared off our positions in PANTECH (7.6% loss), PTRANS (6.8% loss) and OCK (6.2% loss) after hitting cut loss levels yesterday.

Source: Hong Leong Investment Bank Research - 9 Feb 2018