MARKET REVIEW

Despite lingering trade concerns ahead of the G7 summit, Asian stock markets managed to recoup earlier losses and ended in the positive territory The Nikkei 225 rose 0.28%, while Shanghai Composite Index and Hang Seng Index Gaines 0.75% and 0.31%, respectively.

The FBM KLCI continued to trade lower for another session but at a milder pace, where the key index dropped only 0.03 pts to close at 1,755.14 pts. However, on the broader market, stocks were resilient as market breadth was positive with 534 gainers vs. 369 losers. There were 2.73bn shares traded for the day, worth RM2.69bn. Consumer, REITs, industrial products and constructions sub-indices were some of the sectors that outperformed the KLCI.

Wall Street were noticing mixed trading activities as there were positive news flow on technology stocks, while upside of the broader market was being capped by extended trade worries between US and its trading partners after Mexico unveiled tariffs against US agriculture and steel products. The Nasdaq increased 0.41%, but the Dow fell 0.06%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI trended below 1,770 on a lacklustre mood as the key index ended flat for the session. The MACD indicator is still hovering below zero, but both the RSI and Stochastics oscillators are turning positive. We think the key index may be ripe for a technical rebound towards 1,770. Next resistance will be pegged around 1,800. Support will be located around 1,710-1,730.

On our local bourse, after the euphoric selling activities after GE14, most of the stocks are oversold and traders may look for trading opportunities on the broader market for a technical rebound. Nevertheless, we think the rebound could be short lived as market tone remains cautious with the resurfacing of negative news flow related to the previous administration.

TECHNICAL OUTLOOK: DOW JONES

The Dow trended sideways after forming a flag formation breakout on Monday. The technical indicators such as MACD, RSI and Stochastics are suggesting the uptrend momentum is intact. Hence, we opine that the Dow could revisit the first target of 25,000 psychological level. Meanwhile, the support will be anchored around 24,000.

In the US, investors are focusing on the G7 summit that will be held this week. Also, with the reciprocal measures imposed on US and its trading partners may reflect in softer trading activities in the stock markets, limiting the upside potential of Wall Street, eventually.

TECHNICAL TRACKER: DAYANG ENTERPRISE

Earnings upcycle star in FY18; Potential bottoming up. We remain positive on Dayang amid undemanding valuation at 11x FY19 P/E (26% lower than 5Y average of 14.8x), as earnings upcycle (after a sluggish FY17) is expected to resume with a strong 28% EPS CAGR from FY18-20. Downside risk is limited, as sentiment is boosted by recent oil price strength (vs RM) and early signs of bottoming up share price coupled with recent share buy-back by major shareholders.

Source: Hong Leong Investment Bank Research - 6 Jun 2018