MARKET REVIEW

Most of the Asian stock markets closed in the negative territory amid the escalating trade tensions between the US and China, whereby China would retaliate against the recent threat by the US. The Nikkei 225 and Hang Seng Index declined 1.33% and 0.84% respectively, while Shanghai Composite Index (+0.04%) ended flattish.

Meanwhile, the FBM KLCI traded mixed throughout the session and ended marginally higher by 0.04%. Market breadth was slightly bearish with 487 losers vs 402 gainers, accompanied by 2.19bn shares traded for the day (worth RM2.05bn). Gloves sector and (Hartalega & Top Glove) and paper-related (MUDA & ORNA) stocks traded actively higher.

Wall Street ended lower on the back of geopolitical tension in the UK, Turkey and Russia, which spooked investors’ sentiment, resulting in a drop in most of the major indexes. The Dow and S&P500 plunged 0.77% and 0.71%, respectively. Meanwhile, investors flocked into US currency, causing a huge slump in Turkish lira.

TECHNICAL OUTLOOK: KLCI

Despite the FBM KLCI hovering above the SMA200, we see weakening in momentum as the MACD Histogram is declining over the past few weeks, while momentum oscillators (RSI and Stochastic) are overbought. Resistance will be envisaged around 1,810-1,820, while support will be located around 1,760-1,770.

Tracking the negative undertone in the US and we think selling interest may emerged on the overbought equities on Bursa Malaysia after the KLCI rebounded from 1,650 to above the 1,800 level without a significant retracement, coupled with the uncertain August reporting season, capping the key index’s upside near the 1,810 level.

TECHNICAL OUTLOOK: DOW JONES

The Dow pulled back after revisiting the strong resistance along 25,500. The MACD Indicator is weakening and forming a “sell” signal as MACD Line crossed below the Signal Line. The RSI and Stochastic oscillators are trending lower. Resistance will be set along 25,500-26,000. Support will be pegged around 25,000.

On Wall Street, we expect further consolidation following the heightened trade and geopolitical tensions between the US and other countries. Moreover, should there be any confirmed retaliation measure by the China this month, we anticipate global markets to trade on a negative bias mode. Hence, upside of Wall Street May be limited near the 25,500-26,000.

TECHNICAL OUTLOOK: CLOSED POSITIONS

We had squared off our technical tracker positions in ROHAS (7.0% gain) and CCMDBIO (6.2% loss) last Friday.

Source: Hong Leong Investment Bank Research - 13 Aug 2018