MARKET REVIEW

Most of the Asian stock markets ended in the negative territory ahead of the US$34bn trade tariffs that will be imposed on China products by the US, which will be taking effect on 6th July as well as lingering concerns that reciprocal actions by its key trading partners may worsen the global growth. The Nikkei 225 and Shanghai Composite Index plunged 2.21% and 2.52%, respectively, while Hang Seng Index rose 1.61%.

Following the window dressing activities last Friday, the FBM KLCI resumed in the negative region and market sentiment remained clouded by the lingering trade tension between US China. The FBM KLCI fell 0.38%, while market breadth was negative with decliners led gainers by a ratio 5-to-3. Meanwhile, overall traded volumes stood at 1.70bn (worth RM1.62bn). Gloves sector were traded actively on a higher note with the help of weaker ringgit trend.

US stock markets managed to reverse earlier losses to trend higher into the positive territory, but gains were limited on the back on-going worries on US-China trade policies. The Dow traded to an intraday-day low of 24,077.56 pts (-0.80%) before moving higher to 24,307.18 pts (+0.15%), while the tech-heavy Nasdaq gained 0.76% lifted by FANG stocks.

TECHNICAL OUTLOOK: KLCI

Despite the FBMKLCI ending on a lower note, the negative momentum is likely to be weakening as suggested on MACD Histogram (recovering towards zero) as well as oversold momentum oscillators (RSI and Stochastic). Hence, we think the short term downside will be seen the near support of 1,640-1,650. On the other hand, the resistance will be pegged around 1,700-1,725.

With the on-going trade developments between the US-China, investors may stay cautious and remain on the sidelines, deploying the wait-and-see over the near term. Hence the FBM KLCI may trend sideways between the 1,650-1,725 levels. Also, we think the trade spats concerns may resurface if the trading partners intensify with reciprocal tariff actions.

TECHNICAL OUTLOOK: DOW JONES

The Dow continues to thread above the trendline and hovering around the SMA200, we think the recovering MACD Histogram could lift the key index higher. Also, with the oversold stochastic oscillator, the key index may rebound mildly towards 24,500-25,000. Support will be pegged around 24,000.

Market choppiness may persist with the continuation of trade tensions worries as key trading partners of the US could retaliate with tariffs measure, and likely to dampen growth eventually. Hence, Dow’s upside may be limited over the near term, forming the extended consolidation phase.

TECHNICAL TRACKER: TELEKOM MALAYSIA

Attractive DY to cushion selloff; Potential relief rebound. We see TM’s rout (-50% YTD and 38% since the eve of GE14) as overdone, pricing in substantially the uncertainty ahead of the implementation of the MSAP by the MCMC. Values emerge amid undemanding 14.6x FY19 P/E (28% lower than industry) and attractive 6% FY19E DY (45% higher than peers), supported by a strong 14% EPS FY18-20 CAGR. Potential downtrend reversal amid Tweezers bottom pattern.

Source: Hong Leong Investment Bank Research - 3 Jul 2018