MARKET REVIEW

Asian stock markets ended mostly lower after Donald Trump cancelled the meeting with the North Korean leader Kim Jong Un on 12th June. Also, South Korean and Japanese automakers traded lower after US Department of Commerce has started an investigation into automobile imports on a “national security" basis. The Hang Seng Index and Shanghai Composite Index fell 0.56% and 0.40%, respectively.

On the local front, the FBM KLCI rebounded 1.22% towards 1,797.40 pts after falling 1.58% on Thursday. Market breadth turned positive with a ratio of 5-to-4. Overall market volumes stood at 2.20bn, worth RM2.95bn. Also, the construction sub-index rose 1.09% helped by IJM (+6.0sen) and Kerjaya (+6.0sen), while trading/services sub-index increased 1.70% lifted by Axiata (+22.0sen) and Genting Malaysia (+29.0sen).

Wall Street ended another session on a lower closing led by energy stocks following the steep drop in oil prices. However, the losses were cushioned out by gains in chipmakers as well as comment from Donald Trump on the potential resumption of the US-North Korea summit (a day after cancelling it). The Dow fell 0.24%, while Nasdaq gained 0.13%.

TECHNICAL OUTLOOK: KLCI

Despite the more than 1% rebound last Friday, FBM KLCI is hovering marginally below the SMA200. The MACD Indicator threading below the zero level, indicating that the trend is negative. Nevertheless, the RSI and Stochastics are both oversold – the FBM KLCI may be due for further technical rebound. The resistances will be located around 1,800 and 1,830. Support will be pegged around 1,760, followed by 1,740.

On the local front, we expect the market sentiment to stay sideways until further clarity on the action plan on the national debt status by Pakatan Harapan, coupled with the details on the review of mega construction projects and toll concessions. Meanwhile, traders could focus on defensive sectors such as consumer and REITs under this cautious environment.

TECHNICAL OUTLOOK: DOW JONES

After trading near the 25,000 psychological level, the Dow has turned sideways over the past week. The MACD Indicator is hovering above zero – indicating uptrend. Meanwhile, the RSI and Stochastics oscillators are hovering above 50. We may anticipate that the Dow may be poised for a flag formation breakout over the near term.

On the Wall Street, we still maintain neutral on the outlook as there are still some overhang issues on the trade war as well as the Trump-Kim summit. Traders may focus on the upcoming statistics such as Chinese PMI and US jobs report that will be coming out on Thursday and Friday, respectively.

Source: Hong Leong Investment Bank Research - 28 May 2018