Market Review

• Asian stock markets traded lower after Taiwan Semiconductor Manufacturing (TSMC) guided on a softer quarter ahead, resulting in the weaker trading tone across the technology sector last Friday. The Nikkei 225 fell, 0.13%, while Hang Seng Index and Shanghai Composite Index declined 0.94% and 1.47%, respectively.

• In tandem with the regional bourses, the FBM KLCI closed in the negative territory at 1,887.75 pts (-0.39%). Market breadth was negative with losers led gainers by a ratio of 3-to-1. Overall market volumes stood at 2.44bn (worth RM2.16bn). Bucking the trend, selected consumer heavyweights such as F&N and Dutch Lady noticed some emergence of buying support under the cautious market environment.

• Similarly, sentiments on Wall Street were affected by the comments from TSMC and Apple Inc led the technology sector lower. Also, investor were monitoring on the interest rates as the 10-year Treasury yield shot above 2.90 (highest in 4 years). The Dow and S&P500 slipped 0.82% and 0.85%, respectively, while Nasdaq fell 1.27%.

Technical View

Momentum declining, KLCI may face selling pressure

• The FBM KLCI ended on a softer note, but still hovering above the short and long term moving averages; suggesting the uptrend is intact. However, the MACD Histogram has turned red and Stochastics is overbought, the key index could face with profit taking activities over the near term. Resistance will be envisaged around 1,890-1,900, while the support will be set at 1,850-1,860.

Market Outlook

• Dow outlook: Based on the recent developments on the ongoing reporting season, we believe the better-than expected results will be able to cushion out the downside move on the Dow. However, the guidance from TSMC may soften the outlook on the technology sector, contributing towards a potential downgrade in most of the tech giants in the US.

• KLCI outlook: Meanwhile, on the local front, we anticipate profit taking activities to extend over the week after Wall Street trended weaker last week, especially in the technology stocks. Having said that, KLCI’s near term support will be located around 1,850 amid the healthy inflows of foreign funds (April 2018: +RM1.23bn).

Source: Hong Leong Investment Bank Research - 23 Apr 2018