MARKET REVIEW

Asian stock markets trended lower ahead of few major events such as BOJ and the Fed’s policies meeting this week. There is increasing speculation that the BOJ may tweak its monetary policy on the back of lower bank earnings and muted inflation in Japan. The Nikkei 225 declines 0.74%, while Shanghai Composite Index and Hang Seng Index fell 0.12% and 0.25%, respectively.

Although the FBM KLCI managed to close on a positive note, sentiment on the local front was muted tracking the overnight decline in Wall Street, coupled with the negative performances on regional benchmark indices. Profit taking activities extended for another day which led to a negative breadth on the broader market (535 losers vs. 332 gainers). Market traded volumes stood at 2.20bn.

Wall Street extended its decline led by steep fall in technology shares such as FANG stocks. Also, investors stayed cautious ahead of the two-day FOMC meeting. The Dow and S&P500 dropped 0.57% and 0.58%, respectively, while the tech-heavy Nasdaq plunged another 1.39%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI trended marginally higher for another session, but the key index continues to hover below the SMA200. The MACD Histogram is weakening, despite the positive MACD Line. The RSI and Stochastic oscillators are suggesting that the FBM KLCI is overbought and the upside is likely to be capped over the near term. The resistance will be envisaged around 1,790-1,800. Supports will be pegged around the 1,740-1,750 levels.

On the local front, despite the last minute buying support on the FBM KLCI, we see minimal fresh positive catalysts to lift the broader sentiment. Also, investors may stay wary ahead of the August reporting month as market consensus is anticipating softer 2Q earnings overall. Nevertheless, market could be focusing on the upcoming developments on the 2-day visit (31/7-1/8) by China’s Foreign Minister to Malaysia.

TECHNICAL OUTLOOK: DOW JONES

The Dow extended the decline for another day after visiting the immediate resistance of 25,500 last week. The MACD Line is hovering above zero, but most of the momentum indicators are on a weakening path. We think that the Dow could further retrace back towards the trendline (upper band of the symmetrical triangle). Meanwhile, the near term support will be located around 25,000, followed by 24,500.

On Wall Street, trade development amongst the US and its trading partners remains a concern as Canada, the European Union, Japan, Mexico and South Korea will meet next week to discuss a response to threats made by President Donald Trump about slapping tariffs on U.S. auto imports, this could eventually limit the upside of the stock markets over the near term.

TECHNICAL TRACKER: CLOSED POSITIONS

We squared our Technical Tracker stock pick BIOHLDG yesterday (10.9% gains) after hitting above R2 upside target.

Source: Hong Leong Investment Bank Research - 31 Jul 2018