Market Review

• Despite the reciprocal actions by the US and China which created the trade war tensions in the previous weeks, Asian stock markets regained traction as bargain hunting activities emerged; the Nikkei 225 and Hang Seng Index rose 0.51% and 1.29%, respectively, while Shanghai Composite Index added 0.26%.

• The FBM KLCI (+0.69%, 1,849.71 pts) trended higher as traders brushed off the negative sentiment on Wall Street and managed to scoop up most of the oversold lower liners and small cap stocks, reviving both the FBM Small Cap (+2.26%) and FBM ACE (+2.29%) sub-indices. Market breadth was positive with advancers led decliners by a ratio of 3-to-1, accompanied by overall traded volumes above 2.0bn at 2.22bn.

• Similarly, Wall Street traded on a bullish rebound tone as traders looked beyond the trade war tensions, but throughout the session, earlier gains eased off after FBI raided President Trump’s personal lawyer, Michael Cohen’s office. The Dow surged more than 440.4 pts in earlier session before ending at 23,979.1 pts (+46.3 pts, +0.2%), while S&P500 and Nasdaq rose 0.3% and 0.5%, respectively.

Technical View

Retesting and potential breakout of 1,850

• The FBM KLCI has recovered from the recent immediate low of 1,811.56 pts to the resistance of 1,850. The MACD Line is below zero, but the MACD Histogram has turned green, indicating the momentum is picking up. Should the KLCI breaches above 1,850, next resistance will be envisaged at 1,876, while support will be located around 1,810-1,820.

Market Outlook

• Dow outlook: In the US, we think the mild selling pressure that emerged recently could be short lived as traders may look beyond the current trade tariffs issues until there are more details being revealed. Investors would be focusing on the upcoming reporting season that will be starting this month.

• KLCI outlook : With the easing news flows on US-China trade war, we may expect trading activities to sustain over the near term after buying support was noted yesterday amongst the small cap and lower liners, which contributed to the positive market breadth. We think the tech related stocks may be focus following the recent steep sell down.

Source: Hong Leong Investment Bank Research - 10 Apr 2018