Market Review

• Asian stock markets traded negatively with the sacking of US Secretary of State Rex Tillerson by Donald Trump, coupled with comments that Trump may impose tariffs and investments restrictions against China. The Nikkei 225, Hang Seng Index and Shanghai Composite Index ended lower by 0.87%, 0.53% and 0.57%, respectively.

• Similarly, stocks on the local front snapped the 3-day winning streak, in tandem with the regional’s sentiments as profit taking activities emerged on Nestle amid lofty valuations - the FBM KLCI slid 0.37% to 1,857.06 pts. Also, market breadth was negative with decliners led advancers by a ratio of 2-to-1. Although buying support was subdued, selected export-oriented (Hartalega) and O&G (Dialog and Wah Seong) stocks were traded higher.

• Wall Street headed lower for the third straight day amid intensifying fears on trade war following President Trump's statements to impose tariffs on China. The Dow fell 1.00% led by Boeing as selling pressure continued after the signing of the steel and aluminium import tariffs.

Technical View

Technicals are softening, next support at 1,850

• After hitting the downward trendline near the 1,866 level, key index succumbed to profit taking activities. However, MACD Indicator remains positive, while RSI and Stochastics are flattish along 50. We think the upside is limited over the near term with the flattish technicals. Support will be pegged around 1,840-1,850. Nevertheless, should the key index breaches above 1,866, next target will be located around 1,872, followed by 1,896.

Market Outlook

• We think the US stock markets may trade cautiously as trade war concerns may impact the global economy growth in the long run. Also, the FOMC meeting will be the immediate focus. Hence, the Dow could be on a downward bias view at this juncture and is likely to revisit support around 24,500.

• Meanwhile, we think the negative tone on Wall Street could spillover towards Bursa Malaysia, hitting the small cap and lower liners after consumer heavyweights have started the profit taking mode. Moreover, investors in town are waiting for more clarity on the dissolution of parliament and the upcoming GE14 schedule. The FBM KLCI’s upside likely to be capped along 1,866-1,872.

Source: Hong Leong Investment Bank Research - 15 Mar 2018