Market Review

• With Gary Cohn quitting as Trump’s economic advisor, Asian stock markets went into a choppy trade led by the steel and metal related sectors on the back the potential protectionist tariffs measure by Donald Trump. The Nikkei 225 declined 0.77%, while Hang Seng Index and Shanghai Composite Index fell 1.03% and 0.55%, respectively.

• Surprised by the resignation of Gary Cohn, stocks on the local front trended in the negative tone, in tandem with the regional markets – the FBM KLCI dropped 0.57% to 1,837.90 pts. Market breadth was extremely negative with nearly 10 decliners for every 1 advancer. Overall market volumes stood at 3.11bn, worth RM3.17bn.

• US equities ended on a mixed note after Donald trump commented that Mexico and Canada may be exempted from the planned tariffs on steel and aluminium products. The Dow and S&P500 pared down intraday losses, but still hovering in the negative zone. However, Nasdaq managed to turn green for the day.

Technical View

KLCI to stay within 1,840-1,860

• The FBM KLCI rebounded above 1,840 led by bargain hunting activities. Despite the softer MACD Line, we think the technical rebound may extend over the near term as the momentum oscillators are pointing for a recovery. The next resistance will be pegged around 1,860-1,870. Meanwhile, support will be anchored around the 1,830- 1,840.

Market Outlook

• In the US, market participants are focusing on the tariffs threat, which may lead to a full-blown trade war, coupled with the surprise move by Gary Cohn could extend the selling pressure over the near term. Also, market skittishness may persist as European Union has responded with preparing punitive steps on iconic US goods, if Trump continues with his implementation of the import tariffs.

• On the local front, following the extreme sell down on small cap stocks, we think there could be opportunities to scoop up oversold shares for short term trading. Nevertheless, sentiment is likely to stay cautious with the potential emergence of a trade war. Also, traders will be focusing on the ongoing parliament and the status of the upcoming GE14. At this juncture, we opine that the FBM KLCI's upside will be set along 1,860.

• Closed positions: We squared off our positions in MRCB (7.2% loss, hit cut loss zones at RM1.03) and WCT (10.7% loss at RM1.50) yesterday.

Source: Hong Leong Investment Bank Research - 8 Mar 2018