Market Review

• Asian stock markets ended on a mixed note after the Syria air strike episode and investors also traded cautiously ahead of China’s GDP that will be released on Tuesday, as consensus were anticipating an easing GDP data. The Nikkei 225 rose 0.26%, while Hang Seng Index and Shanghai Composite Index plunged 1.60% and 1.53%, respectively.

• Despite the geopolitical worries over the weekend, the FBM KLCI ended on a positive tone amid buying support on Genting Malaysia (+4.3%) and Telekom Malaysia (+3.9%). However, market breadth was negative with decliners led advancers by a ratio of 5-to-4. Overall traded volumes stood at 2.68bn, worth RM2.06bn. Nevertheless, O&G stocks were actively traded with the firmer Brent oil prices above US$70.

• Wall Street closed positively as investors looked beyond the Syria air strike and focused on earnings season after Secretary of Defense James Mattis mentioned that the strikes is a one-off event which were aiming at Syrian government’s chemical weapons infrastructure. The Dow advanced 0.87%, while S&P500 added 0.81%.

Technical View

Positive technicals to support the upward momentum

• The FBM KLCI continues to trend higher, surpassing the recent resistance at the 1,876 level. With the positive technicals on MACD indicator, RSI and Stochastics oscillators, we anticipate that the key index could extend its upward trend towards 1,880 and 1,896. Meanwhile, on the support would be anchored around 1,850-1,860.

Market Outlook

• Dow outlook: Although there are several downside risk events (trade war and geopolitical risk) that are developing, we think the ongoing reporting season should be able to cushion out the downside risk over the near term as this is the first quarterly earnings after the corporate tax cuts move by President Trump.

• KLCI outlook: Meanwhile, in the local front, stocks are likely to stay sideways ahead of the GE14. Nevertheless, we saw month-to-date foreign inflow at RM764.3m, which could be emerging amongst the oil and gas stocks after Brent crude oil prices surged above US$70.

Source: Hong Leong Investment Bank Research - 17 Apr 2018