MARKET REVIEW

Most major Asian markets took the Trump and Kim meeting in stride amid optimism that the two countries have found some common ground and will continue to have dialogue on denuclearisation. However, the gains narrowed as the world’s monetary policy takes centre stage as the Fed and ECB central banks meet this week with focus turn to policy languages.

Bucking gains in regional markets, KLCI slipped 11.6 pts or 0.66% to close at day low at 1,764, led by selling spree in ASTRO (-7 sen to RM1.58), GENTING (-20 sen to RM8.60), MAYBANK (-16 sen to RM9.60), DIGI (-6 sen to RM4.49) and CIMB (-8 sen to RM6.13). Market breadth was negative with 309 gainers as compared to 571 losers. Ahead of the extended weekend Hari Raya holidays (half-day session on 14 June and 15 June), trading volume decreased to 2.36bn shares worth RM2.39bn as compared to Monday’s 2.61bn shares worth RM2.40bn.

The Dow Jones ended flat (-1.6 pts to 25,320) as investors shifted their attention away from a landmark summit between Donald Trump and Kim Jong Un to the start of a series of important central-bank meetings. The Fed is expected to raise interest rates in this upcoming FOMC meeting and the ECB is also anticipated to announce the timing for unwinding its bond buying on Thursday evening (Malaysian time 9pm).

TECHNICAL OUTLOOK: KLCI

After surging from a low of 1,709 (30 May) to a high of 1,804 (7 June), KLCI trended lower following the shooting star formation. Given the long holidays ahead and weakening technicals of flattish MACD and hook down in RSI and Stochastics oscillators, we think the key index may further consolidate further. Key supports are 1,744-1,755 while resistances fall on 1,780-1,800.

Bursa Malaysia is likely to remain volatile as foreign investors are jittery due to heightened global risk aversion towards EMs coupled with the domestic policy uncertainty, with key attention to the country’s fiscal and debt position coupled with growth risks following several mega projects reviews and cancellations. Externally, tighter monetary policies and escalating risks of protectionist policies could weigh on the country’s current account surplus and Ringgit. Nevertheless, the bigger picture for Malaysia looks sanguine as institutional reforms, a more transparent government and curbing corruption will help improve Malaysia’s governance scores, and strengthen investor confidence in the medium to long term.

TECHNICAL OUTLOOK: DOW JONES

The Dow continues to trade above the uptrend line support near 24,800, suggesting that the uptrend is intact. Meanwhile, the MACD indicator has expanded positively above zero but the RSI is in flattish mode, suggesting possible brief sideways consolidation. Hence, we opine that the Dow could still revisit the 25,500-26,000, with the immediate support located around 24,800-25,000.

Away from international relations after the historic Trump-Kim summit, investors will refocus on central-bank meetings this week. While US markets have remained comparatively calm over the past two weeks, stricter monetary policy from the Fed, as well as more hawkish commentary from the ECB, appeared to stress certain debt-heavy emerging economies, which may spark interim volatility towards the stocks and bonds markets.

TECHNICAL TRACKER: CLOSED POSITION

Yesterday, we took profit on Pecca (6.5% return) amid weakening technical.

Source: Hong Leong Investment Bank Research - 13 Jun 2018