Market review

• Asian equities trended on a mixed tone during the Asian hour amid the de-escalation in recent trade fear and softer tone of geopolitical risk after Trump’s tweets. The Nikkei 225 rose 0.55%, while Shanghai Composite Index and Hang Seng Index dropped 0.65% and 0.07%, respectively.

• Despite the soothing tone from President Trump, the FBM KLCI ended lower at 1,868.47 pts (-0.27%). However, FBM Small Cap (+1.09%) and FBM ACE (+2.66%) ended on a positive note, which contributed towards a positive market breath (601 gainers vs 325 losers). Overall market volumes stood at 2.72bn, worth RM2.19bn. Topping the actives list were mostly the O&G stocks on the back of firmer crude oil prices.

• Meanwhile, Wall Street traded lower despite better-than expected earnings reported from banking stocks such as JP Morgan, Citibank and Wells Fargo. Also, investors were still uncertain on outcome of the trade discussions between US and China; the Dow fell 0.50%, while S&P500 slipped 0.29%.

Technical view

Downside limited as technicals remain positive

• The FBM KLCI snapped the 6-day winning streak last Friday, but the MACD indicator remained intact above zero. Both the RSI and Stochastics are hovering above 50; suggesting that the upward momentum is healthy. Hence, we think the key index’s downside could be limited along the support of 1,830-1,840, while the resistance will be envisaged around 1,870-1,876.

Market outlook

• Dow outlook: In the US, we believe investors will stay cautious after the air strike in Syria last week, further developments on the geopolitical tensions will be monitored after an already eventful week. Nevertheless, traders may look out for opportunities with the ongoing reporting season, which may reflect the first quarterly earnings after the corporate tax cuts by Donald Trump late last year.

• KLCI outlook: Similarly, we think the market sentiment on the local front may stay downward bias on the back of the Syria air strike episode. Nevertheless, should there be a firmer crude oil prices out of this Incident, traders may grab the opportunity to trade the O&G stocks.

• Closed positions: We squared off our trading idea positions on Armada (10.6% return) and Dayang (6.5% return) on 13 Apr.

Source: Hong Leong Investment Bank Research - 16 Apr 2018