MARKET REVIEW

Despite the on-going trade fears among investors, Asian regional benchmark indices managed to reverse their downward move and most of the stock exchanges rebounded. Also, the People’s Bank of China delivered a surprise injection of funds (200bn yuan or USD31bn) after President Donald Trump commented to impose a 10% tariff on USD200bn of Chinese goods. Nikkei 225 increased 1.24%, while Hang Seng Index and Shanghai Composite Index rose 0.77% and 0.31%, respectively.

Bucking the positive trend on the regional key indices, the FBM KLCI ended in the negative zone (8th losing streak), led by banking heavyweights. Overall traded volumes were still below the 2.0bn mark, while the turnover value stood at RM2.21bn. Market breadth, however was positive; there was 439 gainers vs 356 losers on the broader market. Also, selected stocks within the technology sector such as Unisem (+6.2%) and D&O (+1.4%) traded actively higher.

Meanwhile, Wall Street ended mixed amid the uncertain trade war episode, where the Dow closed lower by 0.17%, registering the seventh day of losses. However, S&P500 and Nasdaq gained 0.17% and 0.71%, respectively, the latter rallied to fresh record highs lifted by FAANG stocks.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI headed lower near the 1,709 level (lowest point on 30th May) and the MACD indicator expanded negatively below zero. However, the RSI and Stochastics oscillators are approaching the oversold region. The key index could be due for a technical rebound with limited upside near 1,740-1,750. Should the key index breaches below 1,709, next support will be located around 1,700.

On the local front, after the selling move on FBM KLCI, we anticipate that the bargain hunting activities could emerge amid oversold index heavyweights. However, it is likely to trade on a range bound mode as upside is limited with the prolong trade fears between the US and China.

TECHNICAL OUTLOOK: DOW JONES

The Dow maintains its short term downtrend and the MACD Line is suggesting that the momentum is negative, but the Stochastic oscillator is oversold. Hence, we think the Dow may be due for a technical rebound near the trendline support. The resistance will be envisaged around 25,000 and the support will be pegged around 24,500.

Wall Street managed to sustain its momentum led by bargain hunting activities in technology sector despite a drop in the Dow’s components. Nevertheless, should Trump’s administration impose another round of tariffs on Chinese products, we may face with further increase in market volatility. Meanwhile, treasury yield rose as the Fed’s chairman Jerome Powell commented that US central bank should continue with a gradual pace of interest rate hike.

TECHNICAL TRACKER: CLOSED POSITION

Yesterday, we closed position on SERBADK (2.1% loss) in our Technical Tracker recommendation.

Source: Hong Leong Investment Bank Research - 21 Jun 2018