MARKET REVIEW

As soon as Donald Trump threatens new round of USD200bn tariffs on China products, Asian stock markets were splashed in the red as investors reduced further their exposure on equities; Shanghai Composite Index and Hang Seng Index plummeted 3.72% and 2.78%, respectively, while Nikkei 225 dropped 1.77%.

In tandem with the regional indices, the FBM KLCI ended lower by 1.61% to 1,715.36 pts with the ongoing trade war concerns between US and China. Market breadth turned negative with decliners led advancers by a ratio of 3-to-1. Market traded volumes was 2.31bn, worth RM2.66bn. Nevertheless, selected stocks within the export-oriented sector such as gloves/rubbers and technology managed to trade higher on the back of weaker ringgit position.

Another round of selling interest were noticed on Wall Street as investors were shunning away from stock markets after President Trump commented to potentially impose another round of tariffs on USD200bn China goods. The Dow plunged 1.15%, while S&P500 and Nasdaq fell 0.40% and 0.28%, respectively.

TECHNICAL OUTLOOK: KLCI

Again, the FBM KLCI ended lower, registering the 7-day of losses, the MACD Indicator has issued a “sell” signal as MACD Line crossed below the Signal Line. Both the RSI and Stochastics oscillators are below 50. We may anticipate the key index to further pullback towards the support around 1,700-1,710. Meanwhile, the resistance will be envisaged around 1,750-1,760.

Tracking the negative overnight performance on Wall Street, market sentiment is likely to stay volatile on a downward bias mode. The FBM KLCI could further retrace towards the 1,700 level. Nevertheless, we think stocks which are severely oversold within the technology sector may buck the trend amid weaker ringgit trend.

TECHNICAL OUTLOOK: DOW JONES

The Dow continues to trade lower, forming the 6-day losing streak and is hovering below the SMA10. The MACD indicator has issued a ‘sell’ signal, while RSI and Stochastics oscillators are on a reversing trend. With the negative technical readings, we may anticipate the key index to extend its consolidation towards 24,500, with the immediate resistance pegged around 25,000.

With the extended concerns over the reciprocal actions between US and China on the trade war, we think market volatility is likely to increase over the near term, accompanied by a negative bias view on the Dow. Besides tariffs war, investors may be focusing on the OPEC meeting this week (22nd June) on the discussion of potential production output hike.

TECHNICAL TRACKER: CLOSED POSITION

Yesterday, we took profit on JOHOTIN (+6% gain) in our Technical Tracker recommendation.

Source: Hong Leong Investment Bank Research - 20 Jun 2018