Market review

• Asian stocks drifted mostly lower despite China’s GDP coming in at 6.8%, which is marginally higher than consensus of 6.7%. Also, the weaker sentiment across the regional was noticed on the back of softer crude oil prices. The Hang Seng Index and Shanghai Composite Index declined 0.83% and 1.39%, respectively, while the Nikkei 225 traded flat.

• On the local front, the FBM KLCI managed to climb marginally above 1,880 led by selected heavyweights like Petronas Gas and Petronas Dagangan. Market volumes surged above 3.0bn mark, while the market breadth was negative with 424 gainers vs 506 decliners. Meanwhile, aluminium related stocks such as Press Metal and Alcom traded higher after the aluminium futures rallied strongly following the US sanctioning of Russia aluminium giant Rusal.

• US equities closed higher as investors set aside geopolitical tension and trade war worries to focus on the ongoing reporting season and technology stocks such as Netflix on the back of better-than-expected 1Q earnings, which led the Nasdaq higher by 1.74%. Both the Dow and S&P500 gained 0.87% and 1.07%, respectively.

Technical view

Symmetrical triangle formation target at 1,930-1,940

• The FBM KLCI maintained its momentum following the triangle pattern breakout last week and closed above 1,880 yesterday. Most of the technical indicators are suggesting that the uptrend is intact, but Stochastics oscillator is slightly overbought. It may attract short term profit taking activities but overall upside will be envisaged around 1,900 and 1,930. Support will be located around 1,850-1,860.

Market outlook

• Dow outlook: We believe the sentiment could turn positive bias over the near term with the reporting season as investors were anticipating that the financial results may register better earnings after the passing of corporate tax bill in December 2017 by President Trump, coupled with the oversold situations on most of the stocks.

• KLCI outlook: On the local front, index heavyweights could scale towards new high with the help of foreign inflows ahead of the GE14, but small caps and lower liners likely to stay neutral as we think profit taking activities may emerge after the recent relief rebound.

Source: Hong Leong Investment Bank Research - 18 Apr 2018