Market Review

Asian equities ended mostly higher as the political turmoil in Italy eased and investors looked for bargain hunting opportunities as Chinese manufacturing PMI were better-than-expected. The Nikkei 225 added 0.83%, while the Shanghai Composite Index and Hang Seng Index rallied 1.37% and 1.86%, respectively. In tandem with the recovery in the regional indices, the FBM KLCI rebounded 1.24% to 1,740.62 pts. The market breadth was positive with 581 gainers vs 409 advancers, accompanied by 4.61bn volumes traded for the day, worth RM9.27bn (highest traded value in a single day in history of Bursa Malaysia). Also, sectors such as industrial, trading and services and technology were traded actively higher.

Wall Street ended lower as US imposed tariffs on metal imports from Canada, Mexico and the European Union, which prompted some reciprocal measures from some of its trading partners. The Dow retreated 1.02%, while S&P500 dropped 0.69%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI traded towards the 1,709 level two days ago and rebounded towards 1,740, forming a bullish harami candle. However, the MACD Indicator is still hovering below the zero level. Nevertheless, the RSI and Stochastics are suggesting that the key index is oversold. The near term resistance will be envisaged around 1,760-1,770. Meanwhile, support will be pegged around 1,700-1,710.

On the local bourse, we think the recent rebound may attract profit taking activities across the board amid uncertain market environment. Traders may focus on stocks that are related to the MSCI and FBM KLCI rebalancing activities as well as severely oversold counters for a short trade.

TECHNICAL OUTLOOK: DOW JONES

The Dow continues to retreat following the retreat of 25,000 psychological level two weeks ago. The MACD Indicator is still hovering above zero. However. Momentum oscillators are hooking downwards. With the technical indicators are suggesting mixed views, we may expect the Dow to further consolidate over the near term. Resistance will be pegged around 25,000, while the support will be located around 24,000.

We believe the market uncertainties could persist over the near term with the fresh developments of the trade war and we may expect US and its trading partners may have extended retaliatory actions. Also, traders may focus on the upcoming FOMC meeting (12-13 June) to understand the interest rates outlook for 2018.

Source: Hong Leong Investment Bank Research - 1 Jun 2018