Market Review

• Asian stock markets ended on a mixed note following the strong gains in the previous sessions after President Xi toned down on the tariffs measures. The Nikkei 225 dropped 0.49% as yen strengthened against the US dollar, while Shanghai Composite Index and Hang Seng Index rose 0.56% and 0.55%, respectively.

• Meanwhile, sentiments on the local front remained positive with small caps and lower liners gaining the front seat, extending gains from the previous sessions; FBM Small Cap and FBM ACE advanced 1.4% and 0.9%, respectively. Market breadth was encouraging with 7 advancers vs 3 decliners on the broader market, accompanied by higher volumes at 4.65bn (RM3.21bn).

• Despite the easing trade war tension, selling pressure resumed on Wall Street following a series of tweets by Donald Trump that escalated tensions with Russia. Moreover, selling interest remained intact after the Fed released minutes for March meeting, which suggested that the US-China trade war as a downside risk to the economy. The Dow and S&P500 dropped 0.90% and 0.55%, respectively.

Technical View

Uptrend momentum intact after downtrend line breakout

• The FBM KLCI has advanced over the past 5 days and the MACD indicator has crossed above the zero level, suggesting the uptrend is intact. Meanwhile, the RSI and Stochastics have recovered above 50 after the recent positive rebound. Resistance will be envisaged around the 1,876, followed by 1,896. Support will be located around 1,830-1,840.

Market Outlook

• Dow outlook: Although President Xi managed to calm the market in the speech, President Trump’s move on Russia has created a new concern, geopolitical tension which may trigger further volatility in the already-weak market sentiment. With this new factor coming into picture, the Dow’s next support will be pegged around 23,000-23,500.

• KLCI outlook: On the local front, profit taking activities could emerge after the recent relief rebound on small caps and lower liners as well as comments from Donald Trump signalling a geopolitical tension risk. Hence, FBM KLCI could be capped along 1,876. Nevertheless, O&G stocks may sustain its trading momentum amid steadier Brent oil prices above US$70.

• Closed position: We took profit on SUNCON at RM2.30 yesterday (14.4% gain).

Source: Hong Leong Investment Bank Research - 12 Apr 2018