Market review

• Asian stock markets trended higher on a relief rally after trade war tension eased as investors were hopeful that the discussions between US and China would be able to avoid a full-blown trade war. The Nikkei 225 gained 1.53% as US dollar strengthened against Japanese yen, while Kospi Index rose 1.22%.

• Similarly, trading interest gained momentum, in tandem with the positive overnight performance on Wall Street. The FBM KLCI up 1.11% to 1,836.13 pts, which lifted the sentiments on the broader market (advancers-to-decliners ratio: 2-to-1). Market traded volumes stood at 2.22bn (RM2.02bn).

• Wall Street rebounded for the third consecutive day, as concerns of an escalating trade conflict between the US and China waned and investors’ focus were at the upcoming earnings season. The Dow and S&P500 rose 0.99% and 0.69%, respectively.

Technical view

Relief rebound, but still below resistance 1,850

• The FBM KLCI trended higher yesterday on the back of a relief rebound, but the MACD Line has dropped below zero (indicating weaker tone on key index). Meanwhile, the RSI and Stochastics are hovering below 50. Hence, should there be any rebound on the KLCI, we may anticipate that the key index could face further selling pressure. Support will be pegged around 1,800-1,810.

Market outlook

• Dow outlook: At this juncture, investors are brushing off the trade war tensions between the two biggest economies and focus on the upcoming earnings season with slight optimism, underpinned by the new, lower tax rates and the recovery. Nevertheless, as Trump just ordered the trade representative to consider US$100bn in additional tariffs on Chinese products, it may trigger a volatile move in the global market.

• KLCI outlook: We think the current rebound on the local front could be short lived amid this uncertain environment. Also, with Trump taking next move on China’s retaliation tariffs, it may send alarming signals to the overall market. Investors are likely to deploy selling-into-strength strategy over the near term.

Source: Hong Leong Investment Bank Research - 6 Apr 2018