Market Review

• Mixed trading was noted across Asian stock markets following the selldown from the overseas equities. The Nikkei 225 slipped into the negative territory led by automakers and technology stocks. Meanwhile, Hang Seng Index (+0.65%) and Shanghai Composite Index (+0.44%) bucked the trend as the latter ended higher after releasing better-than-expected manufacturing numbers.

• Despite the huge selling pressure on Wall Street, heavyweights on the local front were supported and the FBM KLCI was lifted higher above 1,860 at 1,860.86 pts (+0.25%). However, on the broader market, market breadth was negative, there were 648 losers vs 361 gainers. Notable gainers include HBGLOB after the strong 4Q results, while AIRASIA gapped up upon announcing the sale of the aircraft leasing ops for RM4.62bn and a potential special dividend payout.

• Wall Street extended its retracement phase with the Dow declined for the third consecutive day, falling another 420 pts or 1.68% as traders digested statements from Fed Powell's second testimony. Adding to the selling pressure was the protectionist measures declared by President Trump to impose an import tariffs towards steel and aluminium imports.

Technical View

Short term rebound, technicals remain positive

• Soon after the bearish engulfing bar, market rebounded and the FBM KLCI stayed above 1,860. Although the MACD Indicator has issued a “sell” signal, the key index is hovering above the short term moving average. The RSI is above 50, but the Stochastics is overbought. Nevertheless, we opine that the key index may trade on a sideways mode with the resistances envisaging along 1,870-1,880, while support will set around 1,840-1,850.

Market Outlook

• In the US, market participants were focusing on the potential higher interest rate environment this year and may be switching their funds from stocks to bonds. Also, Trump's protectionist policy may turn into a trade war, resulting in slower economic growth and accelerating inflation risk.

• Meanwhile, on the local front, market sentiments likely to turn negative on the back of weaker overnight Dow. However, we think the KLCI will be well supported ahead of the GE14 and the downside support of the key index will be near the 1,840 level.

Source: Hong Leong Investment Bank Research - 2 Mar 2018