MARKET REVIEW

Although Wall Street closed marginally higher, Asian stocks markets succumbed to further selling pressure affected mainly by the lingering trade fears. The Hang Seng Index and Shanghai Composite Index plummeted 1.82% and 1.11%, respectively; the latter erased more than 20% from the 52-W high of 3,587. The Nikkei 225 fell 0.31%.

The FBM KLCI traded towards an intra-day high near the 1,681 level, before reversing to close in the negative territory at 1,666.08 pts (-0.58%). Market breadth was still negative with a ratio of 2-to-1. Market traded volumes stood at 2.01bn, worth RM1.99bn. Although broader market is negative, some of the export-oriented stocks such as Top Glove (+1.2%) and Supermax (+4.4%) traded actively higher.

Wall Street wiped out its intraday gains to end in the negative position for the day as financials and technology stocks traded lower under this uncertain market environment on the back of the fresh trade development. The Dow erased 285.91 pts of intraday gains before ending softer by 165.52 pts at 24,117.59 pts. Meanwhile, utilities sector bucked the market trend as they provide higher dividend yield and less volatile compared to growth stocks, marking their 10th straight winning streak.

TECHNICAL OUTLOOK: KLCI

After the FBM KLCI violated below the 1,710 level, the key index continued to trend lower breaking most of the major support. The MACD Indicator expanded negatively over the past week. Meanwhile, the both the momentum oscillators are still in the oversold position. We think the sentiments are not turning positive yet with the prolong trade development. The upside will be limited around 1,700, while the support will be pegged around 1,650, followed 1,640.

The negative sentiments on Wall Street may affect the regional tone and the FBM KLCI could trend lower today. Nevertheless, with the FBM Small Cap and FBM ACE are revisiting their own support at 14,000 and 4,886 respectively, we anticipate a mild rebound on most of the oversold stocks. Also, the overnight recovery in crude oil prices could lift the trading interest amongst O&G stocks at least for the near term.

TECHNICAL OUTLOOK: DOW JONES

The Dow rebounded on the intraday basis, but still ended lower, retesting the trendline support of 24,107. Despite the oversold signal, the momentum is likely to remain weak on the back of cautious trading with the ongoing trade issues. We think the upside will be limited around 24,500-25,000, while the support will be pegged around 24,000, followed by 23,500.

Investors are assessing the level of curbing on Chinese investments after President Trump commented that a strengthened national security panel (Committee on Foreign Investment in the US - CFIUS) was formed to review the Chinese ownership into buying US tech firms. Besides the recent trade developments, investors may focus on the final reading of 1Q US GDP and jobs data that will be released later tonight.

Source: Hong Leong Investment Bank Research - 28 June 2018