MARKET REVIEW

Most of the Asian stocks were on a higher note as investors were focusing on the upcoming US-China trade negotiations that will be expected later today. Also, Trump mentioned in a tweet to work with Chinese President Xi on resuming business opportunities with ZTE over the near term. The Nikkei 225 rose 0.47%, while Hang Seng Index and Shanghai Composite Index added 1.35% and 0.34%, respectively.

Meanwhile, post GE14, FBM KLCI tanked at the start of the trading session after a long holiday towards 1,797, but managed to recover strongly on an intra-day basis towards 1,876.62 pts and closed at 1,850.42 pts (+0.21%) led by Public Bank and Maybank. Generally, the fear and risk of the change of ruling party in Malaysia was mitigated after Tun Mahathir announced 3 out of 10 of the cabinet members, coupled with the Council of Elders, which boosted the broader market towards a positive note (there were 930 gainers vs 405 losers). Market volume was firm with 6.58bn shares traded for the day, worth RM7.31bn.

Wall Street climbed higher as market participants brushed off trade fears between the US and China as both the two largest economies in the world are meeting up for a positive discussions. The Dow and S&P500 0.27% and 0.09%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI has gapped down and retested the SMA200 level, before reversing to close higher, forming a bullish engulfing candle for the day. Most of the technical indicators are on a recovering process. The resistance will be pegged around 1,870-1,896, while the support will be located around 1,800.

On the local front, the surge of trading activities may attract further participation of the retailers after the GE14. Market is likely to price in the premiums into Pakatan Harapan’s related stocks, while discounting construction and stocks linked to the previous administration. Nevertheless, we expect the trend to stabilize over the next few days as they may be seen as overdone either on the buying or selling activities.

TECHNICAL OUTLOOK: DOW JONES

The Dow Jones maintained its recovery trend towards the 25,000 and mild profit taking activities were noted. The MACD Indicator is suggesting that the trend is positive, but both the RSI and Stochastics could be indicating that the short term momentum is weakening amid overbought status. The immediate resistance will be located around 25,000, followed by 25,500 levels. Support will be pegged around 23,500-24,000.

In the US, we believe the market volatility is likely to stabilize with the constructive move by both the US and China. However, if the outcomes of the trade talks are negative, it may send cautious trading towards US stock market, limiting the upside of the Dow near 25,500. Also, Middle East tension may spur downside risk on the overall stock markets.

Source: Hong Leong Investment Bank Research - 15 May 2018