Market Review

• Asian stock markets ended on a positive tone on the back of a relief rally as the US-China trade war concerns eased after both nations are willing to renegotiate the tariffs and trade imbalances. The Nikkei 225 jumped 2.65%, while Hang Seng Index and Shanghai Composite Index rose 0.79% and 1.04%, respectively.

• Meanwhile, on the local front, the FBM KLCI (+0.14%) traded marginally higher following the positive overnight Wall Street performance, coupled with the healthy recovery on the regional markets. However, market stayed cautious with the tepid trading volumes of 2.04bn (worth RM1.94bn). Market breadth was slightly positive with 463 advancers vs 433 decliners. Among the active sectors, gloves and consumers stocks such as Top Glove, Kossan, Nestle and Padini were traded higher.

• In the US, despite the fading of trade war fears where US and China were open to negotiations to avoid a potential trade war, the rebound was short-lived as traders took overnight short term profits, coupled with the FAANG stocks selldown, which led to a plunge of nearly 3% on Nasdaq. The Dow and S&P500 declined 1.43% and 1.73%, respectively.

Technical View

Technical indicators are flattish

• KLCI has trended higher yesterday after the key index rebounded off the 1,850 level on Monday. However, we expect the upside could be capped over the near term with the weaker sentiments abroad. The MACD indicator is flattish, while RSI and Stochastics oscillators are trending above 50. KLCI’s resistance will be pegged around 1,877, followed by 1,896, while the support will be anchored around 1,840-1,853.

Market Outlook

• Dow outlook: We think the near term heightened volatility trade could persist amid the trade war tensions and the technology giants such as the FAANG stock may extend their selldown phase following the Facebook scandal as market could be expecting further regulations on social media platform.

• KLCI outlook: Meanwhile, negative sentiment on Wall Street could spillover towards stocks on the local front, especially the lower liners and small caps after the relief rebound yesterday. We believe the ongoing volatile environment, coupled with the uncertainties ahead of the GE14 and parliament dissolution could curtail the upside move on the stock market.

Source: Hong Leong Investment Bank Research - 28 March 2018