MARKET REVIEW

Asian stocks markets continue to climb higher after the Dow rallied above the 25,000 psychological level as well as fading trade tension ahead of the G7 summit this week. The Nikkei 225 and Hang Seng Index gained 0.87% and 0.81%, respectively led by banking and financial stocks, but the Shanghai Composite index declined 0.20%.

The FBM KLCI managed to surge towards an intra-day high above 1,800 at 1,801.42 pts (+1.37%), but profit taking activities kicked in and the key index pared down some gains and ended at 1,785.81 pts (+0.49%). Market breadth was still positive with 597 gainers vs. 357 losers, accompanied by 4.06bn (vs. 3.50bn on Wednesday) volumes and RM3.25 total transaction value for the day. Sectors such as construction (+0.96%), properties (+2.09%), technology (+0.85%) and finance (+0.82%) have outperformed the FBM KLCI.

Wall Street closed mixed as profit taking activities emerged on technology stocks after a healthy rally over the week, resulted in a drop in Nasdaq and S&P500 by 0.70% and 0.07%, respectively. However, the Dow managed to end higher at 25,241.41 pts (+0.38%) led by McDonald’s Corp as the fast food chain announced plans to cut job.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI ended below the 1,800 psychological level after it traded higher towards an intraday high of 1,801.42 pts, forming an inverted hammer pattern. The MACD indicator is still on a recovery mode. The RSI and Stochastics oscillators are both trending higher towards 50. Hence, we believe the FBM KLCI may extend its upward move around 1,800-1,806. Meanwhile, supports will be located around 1,770-1,780.

On the local front, we expect the FBM KLCI to trade on a higher note led by potential 1H window dressing activities, but profit taking could emerge on the broader market after the relief rebound over the past 4 trading days. Nevertheless, we opine that investors are still digesting reform plans by the Pakatan Harapan-led government to fine tune their investment strategies moving forward in the 2H18 and could trade sideways over the mid-term.

TECHNICAL OUTLOOK: DOW JONES

The Dow continued to trade higher, but it has formed an inverted hammer candle. The MACD Indicator is still positive, but the Stochastics oscillator is hovering near the overbought region. We may anticipate a mild pullback on the Dow with the support located around the 25,000 level, followed by 24,500. The resistance will be pegged around 25,500.

On Wall Street, investors may remain conservative ahead of the G7 summit as it may trigger comments from Donald Trump on trade issues. Also, investors will be focusing on FOMC meeting and Trump-Kim summit that will be held next week. Should there be any negative surprises out of these events, it may heighten the volatility in the markets.

TECHNICAL TRACKER: CLOSED POSITION

Yesterday, we squared off SUNWAY (+8.2% return) and CCMDBIO (+25.9% return) of our 2Q18 stock picks. From our daily technical trackers stock picks, we also took profits on DNEX (+17.7% return), PWROOT (+13.3% return) and DAYANG (+14.5% return).

TECHNICAL TRACKER: PANCTECH GROUP HOLDINGS

Taking a ride in crude oil recovery; Poise for breakout. PANTECH has registered strong revenue and net profit growth of 28% and 58% and in FY18, supported by better performance in the manufacturing segment arising from strong global demand. With the recovering crude oil price, the management is anticipating more activities within the O&G industries, coupled with the higher demand of PVF from the shale gas segment in the US, likely to benefit the group eventually. PANTECH is retesting the SMA200 and poised for a sideways consolidation breakout over the near term.

Source: Hong Leong Investment Bank Research - 8 Jun 2018