Market Review

• Asian stock markets ended mostly in the red after the slump in the weekly Wall Street. The Nikkei 225 and Hang Seng Index fell 0.66% and 2.28%, respectively. Meanwhile, Shanghai Composite Index pared down earlier losses and closed in the positive territory after Premier Li Keqiang announced 2018 growth target of 6.5% in the China’s National People’s Congress.

• Shares on Bursa Malaysia took a hit as further selling pressure was noted among metal related stocks following the potential impose of the import tariffs on steel and aluminium products by the US. The FBM KLCI dipped 0.72% to 1,842.62 pts. Market breadth was extremely negative with 963 decliners vs. 172 gainers. Overall market turnover stood at was 2.62bn, worth RM2.41bn.

• Soon after Wall Street traded in the negative territory, investors took the opportunity to scoop up oversold stocks, despite Donald Trump reiterating the proposed tariffs on steel and aluminium products. The Dow and S&P500 rebounded 1.37% and 1.10%, respectively. Also, Brent crude oil closed above US$65.

Technical View

Technical rebound in store as KLCI traded near 1,840

• The FBM KLCI continued the downward formation after the drop last week, violating below the 1,850 level. The RSI and Stochastics oscillators are trending lower, in tandem with the weaker MACD line. While, we think the softer momentum may persist, the immediate support will be pegged around 1,840, followed by 1,820. On the flip side, should the KLCI surpass 1,850, next resistance will be envisaged around 1,870-1,880.

Market Outlook

• With the Dow snapping a four-day winning streak and rebounded fairly strongly, we believe the market participants have taken a back seat on the impact of the proposed tariffs on steel and aluminium for the near term. However, we think the rebound may face with profit taking activities ahead of the March FOMC meeting on the back of cautious tone on the interest rate outlook. Also, traders will be focusing on the NAFTA renegotiations that could trigger jittery moments in the stock markets.

• The positive performance on the overnight Wall Street is likely to spillover towards Bursa Malaysia and we opine that investors could bargain hunt on selected oversold steel or aluminium companies and O&G sector amid the rebound in Brent oil.

Source: Hong Leong Investment Bank Research - 6 Mar 2018