MARKET REVIEW

Asian equities ended mostly on a higher note as investors focused on the trade developments between the US and China officials; China had announced to drop the sanctions probe into US sorghum imports. Also, the 10-year Treasury dropped marginally from the multi-year highs. The Nikkei 225 and Hang Seng Index rose 0.40% and 0.34%, respectively, while the Shanghai Composite Index rallied 1.23%.

Meanwhile, stocks on the local bourse traded on a mixed note as the FBM KLCI gave up most of the gains and closed flattish at 1,854.50 pts after the key index traded to an intra-day high of 1,858.62 pts (0.42%). Market breadth was weak as selling pressure emerged on Friday after a euphoric trading last Monday. Overall market volumes stood at 2.92bn, worth RM3.16bn. Meanwhile, properties (+1.00%) and consumer (+1.09%) sectors traded on a positive note.

Wall Street ended slightly lower despite positive developments throughout the trade discussions, but the concerns over the 10-year Treasury yield which is near the multi-year highs limit the gains on the Dow. The Dow ended flat, while S&P500 and Nasdaq declined 0.26% and 0.38%, respectively.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI trended sideways over the past four trading days after the euphoric sentiment on last Monday. The MACD Indicator continues to trend below the zero level, while the RSI and Stochastics oscillators are slightly above 50. We may anticipate the FBM KLCI to trend sideways over the near term. The support will be envisaged around 1,830, while the resistance will be pegged along the 1,876-1,896 levels.

The FBMKLCI has turned mildly lower last week and we anticipate that the market sentiment should stay soft ahead of the review of the construction mega projects and toll concessions, which may send cautious tone to the markets. Hence, the key index may extend the consolidation phase.

TECHNICAL OUTLOOK: DOW JONES

The Dow managed to stay sideways over the past week as investors maintained a cautious trading tone throughout the trade discussions. The MACD Indicator is hovering above zero, while the Stochastics oscillator is slightly overbought. Hence, we opine that the Dow could trend sideways before a solid breakout above the 25,000 resistance level. Meanwhile, support will be pegged around 24,400.

As the two world’s biggest economies have made positive progress on the trade war throughout the discussions last week; Beijing agreed in a joint statement with the US to “substantially reduce” Americas trade deficit with China, we think the sentiment may steady up and buying interest could pick up over the near term.

TECHNICAL TRACKER: CLOSED POSITION

Closed position: Last Friday, we had squared off our position in AIRASIA (5.7% loss) amid weakening technicals.

Source: Hong Leong Investment Bank Research - 21 May 2018