Asian stock markets ended mostly lower as lingering trade spats between US-China remain a concern. Investors were fleeing equities for safe haven assets; the Shanghai Composite Index and Hang Seng Index declined 1.38% and 1.35%, respectively, while the Nikkei 225 rose 0.61%. 

Similarly, trading tone on the local front pared down earlier gains and ended in the negative region; the FBM KLCI decreased 1.02% led by Tenaga (-2.2%), Petronas Dagangan (-3.0%) and Telekom Malaysia (-13.5%). Market breadth was negative as losers outpaced gainers by a ratio of 7-to-2. Market volumes stood at 2.12bn, worth RM2.68bn. Nevertheless, selected consumer stocks such as Nestle and F&N bucked the market trend.

Wall Street ended lower amid the extended fears of an impending trade tension between US and China after President Trump threatened to impose tariffs on USD200bn of Chinese goods earlier this week. The Dow and S&P500 dived 2.5% and 1.1%, respectively, while Nasdaq slipped 0.4%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI declined further breaching below the 1,700 psychological level, marking the 9th consecutive day of losses. The MACD indicator expanded negatively below zero, while the RSI is hovering below 50. We believe the upside is capped over the near term as most of the technical indicators are weak as this moment. The resistance will be located around 1,700, followed by 1,740. Support will be located around 1,680, followed by 1,660.

As the market price in the further on the trade tensions development, we opine that the local bourse would be affected and may trade lower over the near term. Internally, investor will need to get more clarity on policies crafted by the PH-led government. Should there be any negative surprises, we may see extended retracement phase on KLCI. Hence, upside likely to be capped over the near term.

TECHNICAL OUTLOOK: DOW JONES

The Dow has breached the 24,500 level after falling for the past 8 trading days. The MACD Indicator is trending lower, while the RSI and Stochastic oscillators are below 50. With the weaker indications from the technical indicators, the Dow is likely to extend its consolidation within the symmetrical triangle formation. Upside resistance will be pegged around 25,000, while the support will be located around 24,000.

We think the market sentiment will still be affected by the ongoing trade war tensions and stocks overall could take further beating should there be new announcements by Trump administration over the near term. Meanwhile, some major economic data that traders could focus are the Manufacturing Purchasing Managers' Index (PMI) and Services PMI that will be released later today.

TECHNICAL TRACKER: CLOSED POSITION

Yesterday, we took profit on TALIWRK (8.4% gain) and squared off LUXCHEM (1.6% loss) in our Technical Tracker recommendations.

Source: Hong Leong Investment Bank Research - 22 Jun 2018