MARKET REVIEW

Asian stock markets ended mostly lower as investors were focusing on the 10-year Treasury yield, which has risen towards the 3.12% level, as well as the trade talks between the US and China. The Nikkei 235 added 0.53%, while Shanghai Composite Index and Hang Seng Index declined 0.48% and 0.54%, respectively.

Meanwhile, on the local front, the FBM KLCI ended slightly lower, paring down earlier gains; the key index inched down by 0.21% to 1,854.44 pts amid last minute profit taking activities on selected heavyweights. Market breadth was negative with a ratio of 5-to-4, accompanied by overall traded volumes of 3.33bn, worth RM3.78bn. Most of the construction stocks continued to take a beating on a potential review of mega projects in the future.

Wall Street was fluctuating between the positive and negative region throughout the trading session as investors were afraid that the 10-year Treasury yield that has trended to a multi year high may dampened the attractiveness on equities. Also, the recent developments on the trade discussions between US-China were not as favourable as expected.

TECHNICAL OUTLOOK: KLCI

After a strong rebound above the SMA200 on Monday, where the FBM KLCI has retested 1,797 and closed within the uptrend channel, the upside momentum may have taken a back seat as the key index closed negative for the first time after election. The MACD Line and the RSI are below the zero and 50, respectively.

On the local bourse, we expect the trading activities to tone down after a euphoric trading on Monday (post-GE14). Stocks may succumb to profit taking activities as short term players may be locking in profits over the near term. Nevertheless, oil and gas stocks are still attractive amid the firmer Brent crude oil trend (retested US$80 overnight).

TECHNICAL OUTLOOK: DOW JONES

The Dow has pulled back mildly near the SMA10 (short term moving average) after retested the 25,000 level. The MACD Indicator is still positive, but the Stochastics oscillator is slightly overbought. We expect the Dow may trend higher after a short consolidation. Upside target will be pegged around 25,000, support will be located around 24,400.

In the US, there are still some uncertainties related to the unresolved trade issues between US and China. Moreover, the 10-year Treasury yield could spark some cautious tone in the stock markets as it trend above the 3.10% yesterday.

TECHNICAL TRACKER

Closed position: We had squared off UNISEM (24.9% gain), BIOHLDG (9.5% gain), MASTEEL (4.5% gain) and MRCB (11.5% loss) from our technical trackers stock picks yesterday.

Source: Hong Leong Investment Bank Research - 18 May 2018