MARKET REVIEW

Asian stock markets traded mixed as investors focused on the trade tension as both the officials from US and China will be meeting up this week, coupled with the reassessing of the Fed’s interest rate and global growth outlook this year. The Nikkei 225 and Hang Seng Index declined 0.16% and 1.34%, respectively, but Shanghai Composite Index rose 0.65%.

Meanwhile, the FBM KLCI managed to recoup earlier losses, climbing from the negative region led by Maybank and Tenaga. Selected stocks under the exports sector (wood based and semiconductor) managed to gain traction amid weaker ringgit. Market breadth was negative with losers leading gainers by a ratio of 20-to-19, accompanied by 1.67bn of traded volumes (100-day average volumes: 2.89bn).

Wall Street tumbled at the opening bell as investors were monitoring the developments on US and China officials gathering in Beijing for trade discussion, coupled with some corporate releasing weaker earnings. The Dow plunged near to a 400-point intraday low before recovering marginally higher above the breakeven line for the session as technical traders viewed the SMA200 zone as a buying opportunity. The Dow inched up 0.02%, while S&P500 and Nasdaq slid 0.23% and 0.18%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI ended flattish and hovered below the SMA50 level, while the RSI and Stochastics are hovering below 50. Both the momentum oscillators might be suggesting that the key index may be stuck within the consolidation phase. Upside move will be capped near the 1,880-1,890 levels, while support will be pegged around 1,840.

On Our Local Front, We Expect Most of the Market Participants to be on a Risk-off Mode, Deploying a Wait-and-see Strategy Ahead of the GE14. We Think Market Volumes Will Stay Tepid Over the Near Term. Nevertheless, Short Term Opportunity May Arise Within Export Counters on the Back of Weaker Ringgit Over the Past Two Weeks.

TECHNICAL OUTLOOK: DOW JONES

The Dow has pulled back below the 24,000 psychological level and most of the technical indicators are in the negative region. The immediate support is located around 23,739. Meanwhile, should the Dow perform any rebound move, the upside resistance will be located around 24,500-25,000.

Moving Forward, Investor Will be Paying Attention on US-China Trade Talks Developments, Fed’s Interest Rates Outlook, 10-year Treasury Yield as Well as the Nuclear Agreement With Iran. Any of These Events That Could be Giving Negative Surprises May Send Volatility to the Global Markets.

Negatives Priced In; Pending Downtrend Line Breakout. Values emerged after share prices tumbled 44% from 52-wk high to RM0.78, as MASTEEL is only trading at 0.38x P/BV (64% below its peers) and 4.4x FY17 P/E (31% below its peers and 46% below 10Y average). Management is cautiously optimistic of a good FY18, leveraging of a firm steel prices (average RM2700/MT in 1Q18/RM2678 YTD vs 4Q17 of RM2490) as well as expecting accelerated pick-up in demand from up-and-coming mega infrastructure projects.

Source: Hong Leong Investment Bank Research - 4 May 2018