Market Review

• Despite the stronger closing on Wall Street, Asian stock markets ended in a mixed note as traders were staying cautious ahead of Federal Reserve Chair Jerome Powell’s testimony before Congress. The Nikkei 225 rallied 1.07%, but Hang Seng Index and Shanghai Composite Index slid 0.73% and 1.14%, respectively.

• In tandem with the positive overnight performance on Wall Street, the FBM KLCI inched up higher by 0.61% to 1,871.46 pts led by banking heavyweights amid stronger foreign inflows of RM206.6m. However, market breadth was negative (563 decliners vs 443 advancers) as the FBM Small Cap and FBM ACE declined 0.42% and 1.26%, respectively. Nevertheless, paper packaging stocks like PPHB (+11.8%) and ORNA (+15.2%) gained focus after MUDA reported strong set of results.

• Wall Street reversed and ended in the negative region following the event of the day, Fed Powell's giving his first official testimony on monetary policy to the Congress. Powell mentioned that the economy has been improving since the December's FOMC meeting. The Dow and S&P500 declined 1.16% and 1.27%, respectively.

Technical View

Positive technials, upward trend remains intact

• While negative sentiment could set in, upward momentum remains intact on FBM KLCI as it breaches above 1,870. The MACD Indicator has issued a “buy” signal. Also, momentum oscillators are trending positively above 50. FBM KLCI’s resistance will be envisaged around the 1,880-1,890 levels. Support will be pegged around 1,840- 1,850.

Market Outlook

• In the US, we believe the cautious tone may prevail over the near term as Fed Powell's statement was pointing towards a healthy recovery in the economy and traders could be picking up clues on the potential fourth rate hike this year. The Dow’s upside likely to be limited around the psychological level at 26,000.

• Meanwhile, stocks on the local front could take a mild breather following the weaker trading tone on Wall Street, coupled with the negative local market breadth as small caps and lower liners were being sold down. Also, investors may focus on the final week of reporting season to reassess their portfolio holdings. Nevertheless, based on the positive technicals and foreign inflows, downside of the FBM KLCI is limited around 1,840.

Source: Hong Leong Investment Bank Research - 28 Feb 2018