Market Review

• Despite the flattish to downward bias Wall Street, Asian equities were mostly higher amid bargain hunting activities and investors were focusing on developments of potential talks between the U.S. and North Korea following the meet up of Chinese President Xi Jinping and North Korean leader Kim Jong Un for discussions.

• Still, lacklustre trading tone on the local bourse as investors stayed cautious ahead of the GE14 and dissolution of the parliament, coupled with the external uncertainties such as Trump’s protectionist measures and Wall Street tech giants’ slump. Market volumes were tepid below the 2.0bn mark at 1.89bn, while overall market breadth remained negative with decliners led advancers by a ratio of 5-to-3.

• Wall Street rebound into the positive territory led by Boeing, United Health and Apple amid easing of trade war tensions and fears over tech stocks slump, resulting in the recovery on both the Dow (+1.07%) and S&P500 (+1.40%). However, on the QoQ basis, the Dow and S&P500 have snapped a 9-quarter winning streak.

Technical View

May poise for a breakout despite flattish indicators

• Despite the flattish MACD, coupled with weakening RSI and Stochastics oscillators, the key index could breakout above the trendline and revisit 1,876 (next resistance located around 1,896) over the near term, in tandem with the recovery on Wall Street. However, should there be a downward violation below the support of 1,850, next support will be pegged around 1,840.

Market Outlook

• Dow outlook: Despite the mild recovery on Wall Street, investors are likely to stay cautious amid the Fed's normalization of monetary policy, coupled with the expected interest rate upcycle environment. Also, the intensifying uncertainty of President Trump's agenda on protectionist measures may curtail the upside over the near term.

• KLCI outlook: On the local front, tracking the overnight Wall Street performance as the Dow rebounded off the SMA200 level, we may expect emergence of mild bargain hunting activities among severely oversold small cap and lower liners and anticipate the FBM Small Cap and FBM ACE sub-indices to revisit the 15,000 and 5,500 level, respectively.

Source: Hong Leong Investment Bank Research - 30 Mar 2018