MARKET REVIEW

Taking cues from the positive overnight performance on Wall Street, where Nasdaq hit all time-high, Asian stock markets ended mostly higher led by technology stocks. The Nikkei 225 rose 0.38%, while Hang Seng Index and Shanghai Composite Index Gaines 0.53% and 0.05%, respectively.

On the local front, after several days of sideways trading on the FBM KLCI, the key index managed to form a relief rally as bargain hunting activities emerged; in tandem with the sentiment on the broader market amid oversold situation in most of the stocks. The key index rallied 1.25%, accompanied by positive market breadth, there were 7 advancers for every 2 declining stocks. Market traded volumes were higher at 3.50bn, worth RM3.02bn.

Wall Street advanced strongly led by gains in banking heavyweights such as Morgan Stanley and Goldman Sachs following the rising move in 10-year US Treasury yield (2.98%). Investors shrugged off trade concerns and traded positively focusing on the fundamentals of the economy as trade deficit unexpectedly fell to 7-month low in April (which is likely to give a boost to 2Q18 GDP). The Dow increased 1.40%, while Nasdaq hitting another fresh record, gaining 0.67% to 7,689.24 pts.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI surged strongly after trending sideways over the past 3 trading days. The MACD Indicator continues to recovery positively, while the RSI and Stochastics have turned higher, recovering from the oversold position. The positive technicals may suggest that the key index could revisit the 1,800 level. Support will be pegged around 1,750-1,770.

With the recovery yesterday on the local front, coupled with the positive overnight Wall Street performance, we opine that the stocks are likely to trade higher for the near term. Traders may sectors such as technology amid weaker ringgit position and oversold construction stocks for a short rebound trade.

TECHNICAL OUTLOOK: DOW JONES

The Dow has rallied strongly yesterday after a two-day consolidation following the flag formation breakout. The MACD Indicator has issued a golden cross signal, while the RSI and Stochastics oscillators have hooked above 50. The Dow is slightly positive at this moment and could retest the 25,500 level. Immediate support will be anchored around 24,500.

In the US, as Wall Street has surpassed the 25,000 psychological level, the undertone has turned more bullish. Also, with some of the economic data (jobs data) suggesting positive growth, investors may expose further in the stock markets. Nevertheless, traders may focus on the upcoming G7 summit and FOMC meeting, should there be any fresh developments on trade issues, it should heighten the market volatility, limiting the upside eventually.

TECHNICAL TRACKER: LUXCHEM CORPORATION

One-stop chemicals solutions provider; Rounding bottom. As a trusted one-stop solution provider in the local and overseas industrial chemicals/materials supplies, we remain cautiously positive on Luxchem amid undemanding valuation at 10.8x FY19 P/E (33% lower than its peers), supported by a steady FY18-20 earnings CAGR of 9% and decent yields of 4.5-5.3% pa. There is sign of potential downtrend reversal amid rounding bottom formation.

Source: Hong Leong Investment Bank Research - 7 Jun 2018