Market Review

• Asian key benchmark indices ended mixed as investors stayed cautious ahead of the two-day FOMC meeting, where the Fed is likely to increase interest rate for the first time in 2018. The Nikkei 225 declined 0.90%, while Shanghai Composite Index rose 0.30% and Hang Seng closed flat for the session.

• Meanwhile, most of the small cap and lower liners on the local front ended in the negative territory, accompanied by softer turnover at 1.94bn shares traded for the day (100- day average volumes: 2.92bn). However, the FBM KLCI inched marginally higher by 0.08% to 1,847.94 pts. Also, selected oil & gas-related (UZMA and Lotte Chemical Titan) and export-oriented stocks (Uchitec) were focused.

• Wall Street experienced a selldown at the start of the week led by tech sector as Facebook was being tied to a data scandal, which was being accused managing user information during the 2016 presidential campaign. The Dow fell 1.35%, while S&P500 and Nasdaq declined 1.42% and 1.84%.

Technical View

Technical indicators are suggesting weakness to persist

• Despite the mild rebound on FBM KLCI, the MACD indicator is still weak, while the RSI and Stochastics oscillators continued to hover below 50. We think the key index could stay sideways between with the resistance envisaged around the 1,860 level. On the flip side, the support will be located around the 1,835 level.

Market Outlook

• We believe that the selling interest on tech giants could spillover to other tech heavyweights as it may trigger further increase in regulations on internet platforms. Also, market participants are likely to trade cautiously ahead of the FOMC meeting.

• Meanwhile, tracking the negative performance on Wall Street, we expect traders or retailers to stay conservative, deploying the wait-and-see strategy over the near term without any strong form of buying interest buying. Nevertheless, we believe any downside could be cushioned out by the local institutions ahead of the dissolution of parliament and the major political event (GE14) in Malaysia.

• Trading Idea – WTI. After sliding 14.8% from YTD high of US$66.7 on 25 Jan to a low of US$58.1 on 9 Feb, WTI rebounded 7% to end at US$62.2 yesterday. Given the formation of long-legged Doji (daily chart) and uptick in indicators, we remain cautiously optimistic of a potential triangle breakout in the near term, with ST targets at US$64-66 while supports fall on US$58-60.

Source: Hong Leong Investment Bank Research - 20 Mar 2018