MARKET REVIEW

Asian equities trended lower as investors traded cautiously ahead of the FOMC and ECB meeting that will be held this week, as well as the monitoring the outcome of Trump-Kim summit (12th of June). The Nikkei 225 fell 0.56%, while Hang Seng Index and Shanghai Composite Index declined 1.76% and 1.36%, respectively.

Stock market traded mostly in the negative territory as the FBM KLCI declined 0.42% to 1,778.32 pts on Friday. Market breadth turned negative as losers led gainers by a ratio of 5-to- 4. Market transacted volumes and values stood at 3.10bn and RM2.42bn, respectively. Despite the negative sentiment on the broader market, selected construction and properties stocks such as Gabungan AQRS and IOI Properties traded actively higher.

The Wall Street ended slightly higher but gains were limited as investors were trading cautiously prior to the G7 summit. Traders were also focusing on President Trump’s tweet which commented on its trading partners that may lead to another round of rising trade war concerns. The Dow and S&P500 added 0.30% and 0.31%, respectively, while Nasdaq rose 0.14%.

TECHNICAL OUTLOOK: KLCI

After the shooting star candle formed last Thursday, followed by a black candle on Friday, it is suggesting that the selling interest is dominating the market for the time being. The MACD indicator stayed flattish last week, while the RSI and Stochastics were still hovering below 50. We think that the mixed technicals could be indicating that the FBM KLCI could further consolidate within the region of 1,760-1,800.

On the local bourse, trading sentiment may turn weak following the rising worries on trade war during the G7 summit. Domestically, investors are still looking for fresh catalyst from the Pakatan Harapan-led government after some of the mega projects were being axed and reviewed. Nevertheless, traders may look into opportunities within stocks which are oversold for a short rebound trade.

TECHNICAL OUTLOOK: DOW JONES

The Dow maintained its upward move above the SMA200 and the MACD indicator is hovering above zero suggesting that the uptrend is intact. However, the Stochastics oscillators is overbought, the Dow could be due for a short breather over the near before the key index to revisit the 25,500 zone.

Tension in the G7 summit were seen escalating as Donald Trump withdrawing support of joint G7 statement and left the meeting early for another summit in Singapore with Kim Jong Un. Canadian PM vowed to press ahead with retaliatory tariffs against the US on 1st July. The extended trade war tension could lead to increase market volatility and may dampen the outlook of global growth.

TECHNICAL TRACKER: CLOSED POSITIONS

Last Friday, we squared off CHOOBEE (2.7% loss) of our 2Q18 stock picks. From our daily technical trackers stock picks, we also took profit on GENM (4% return).

TECHNICAL TRACKER: SERBA DINAMIK HOLDINGS

A dynamic O&M and EPCC services provider with strong and international footprint; Poised for a triangle breakout. SERBADK is a solid O&M and EPCC services provider with several assets ownership, providing several recurring income stream. Valuation remains undemanding at 10.8x FY19 P/E vs its closest peer, Deleum (significantly lower market cap and ROE coupled with domestic-centric customers profile), supported by a strong FY18-20 earnings CAGR of 14%. We expect an imminent triangle breakout with medium to LT targets at RM3.68-4.00 levels.

Source: Hong Leong Investment Bank Research - 11 Jun 2018